With flexible ISAs, you can withdraw money from your ISA and ‘replace’ it before the end of the same tax year to carry it forward into the next tax year. Any funds not replaced will be treated as a permanent withdrawal from the flexible ISA. You’re not obliged to return all or even any of the funds withdrawn.
Unlike traditional ISAs, where subscriptions are locked in because withdrawals are always permanent, flexible ISAs like Proplend’s IFISA enable you to withdraw the subscriptions you’ve made this tax year and re-subscribe them to the same or another ISA. You can also withdraw previous years subscriptions from a flexible ISA, albeit these funds will need to be replaced in the same ISA, in the same tax year – if at all. The same is true of income on current year subscriptions that has been withdrawn – it must be replaced within the same ISA, in the same year, if at all (or it will be treated as a new current year subscription).
Generally speaking then, you can choose to remove one amount from your Proplend IFISA and deposit a different amount back to suit your circumstances. Any amount deposited over the total withdrawn would automatically count as new ISA subscriptions, so you would need to have sufficient unused ISA allowance (taking into account your subscriptions to all different ISA types during that tax year).
It’s important to note that whilst all funds within your flexible ISA are technically at your disposal, you can only withdraw funds up to amount of cash available in your account. For an Innovative ISA for example, you may need to sell loan holdings to free up any additional cash you want (or need) to withdraw.
————————————————–
Net Subscriptions
Flexible ISAs work on the basis of ‘net’ subscriptions – total deposits minus total withdrawals over the course of the tax year. At the end of each tax year, all ISA Managers are required to provide a report of these net subscriptions to HMRC, who then check that aggregrate subscriptions to all ISAs for an individual don’t exceed that year’s annual allowance (£20,000 for 2020-21).
Whilst it’s the net subscription at the end of the tax year that ISA managers report, they will never let you subscribe more than the current annual allowance to their ISA alone and you should not attempt to subscribe more than this total allowance across all your ISAs at any point during the year. The running total of subscriptions to all your ISAs during any tax year should never exceed the annual allowance.
Example scenario – Net subscriptions and the one per type per year rule
If you withdraw all subscriptions you’ve made to an IFISA in the same tax year they were subscribed, your net subscriptions reported to that ISA will be £nil but you will still have ‘subscribed’ to your one IFISA. You may still have scope to subscribe to one of the other ISA types (topping up subscriptions already made or subscribing to a new ISA), but if you placed these subscriptions with another IFISA Manager of the same type you would be breaching the one ISA per type per year rule.
If you have subscribed to an ISA provider and decide you want to move your subscriptions to another provider (of the same type) without breaching the one per type rule, you can do so by requesting an ISA transfer instead. All current year subscriptions will need to be transferred together but the receiving ISA Manager would effectively be the replacement ‘one for the year’.
IT IS YOUR RESPONSIBILITY to manage how much you have subscribed to all your ISAs in any one tax year and how many ISAs of each type you’ve subscribed to in that tax year. If you exceed your annual subscription allowance or exceed the number of ISAs of one type you could subscribe to in one year, this will need to be remedied. Your ISA provider(s) may charge you a fee for the extra admin required to repair or even ‘void’ your ISA.
IT’S NOT YOUR RESPONSIBILITY however to attempt to rectify breaches of ISA limits yourself. ISA Managers take the appropriate action on your behalf, based on guidance received from HMRC.
IT’S NOT YOUR RESPONSIBILITY to reallocate (withdraw and re-subscribe) funds that you intend to ‘transfer’ between ISA Managers. ISA transfers are arranged directly between the transferring and receiving ISA Managers (once you’ve completed a transfer form to signify your intent).
————————————————–
