What is a flexible ISA?

A flexible ISA is the term used to explain that you can withdraw money from your ISA temporarily and pay it back within the same tax year without affecting your annual ISA allowance. Before flexible ISAs were introduced in 2016, you couldn’t withdraw money from your ISA and repay it without it eating into your annual ISA allowance. Here we explain the flexible ISA rules.

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Are all ISAs flexible?

No. Cash ISAs, Stocks & Shares ISAs and Innovative Finance ISAs can be flexible but it is up to individual providers whether they offer this service. If you think this is an important feature, you should check before opening an ISA. The Bestinvest Stocks & Shares ISA is a flexible ISA.

Junior ISAs and Lifetime ISAs are not flexible.

How do flexible ISAs work?

Under flexible ISA rules, you can take money out of your ISA and pay it back in as long as you do this within the same tax year.

You can take out money contributed during the current tax year and previous tax years. You can also take out money earned in interest or as gains from investments.

Flexible ISA examples

Ms A withdraws £40,000 from her Stocks & Shares ISA in May. She can pay this back into her Stocks & Shares ISA by the end of the tax year on 5 April. Under flexible ISA rules, this transaction doesn’t have any impact on her annual ISA allowance so, if she is in a position to, she can also pay an additional £20,000 (her annual ISA allowance) into her ISA during the same tax year.

In another example, Mr B pays £20,000 into his ISA in April, using his full current year ISA allowance. In November he withdraws £10,000 from his ISA. Under flexible ISA rules, he can repay this by the end of the tax year.

Can I transfer my ISA if I’m using my flexible ISA allowance?

If you transfer all of your ISA to another provider, you will lose the ability to repay the funds you have withdrawn under flexible ISA rules. Any payments into your ISA will need to come from your remaining ISA allowance.

If you transfer part of your ISA, you may be able to replace funds with the original provider but not the provider you are transferring to.