Flexible ISAs are not new products; they’re a new way in which some ISAs work. In a nutshell, with a flexible ISA you can take money out of your cash ISA and return it in the same tax year without reducing your annual allowance. Flexible ISAs will become “flexible” automatically – you don’t need to do anything in order to get the additional benefits of flexible withdrawals and payments. Both variable and fixed rate cash ISAs can become flexible ISAs – although not all flexible ISA providers offer flexibility on all their products.
As an example, if you have £50,000 in your cash ISA which is made up of £40,000 from previous years and £10,000 from money deposited in the current tax year, you can still deposit a further £10,000 in the current tax year (taking you up to the £20,000 threshold). With a flexible ISA, if you withdraw £10,000 you can put in another £20,000 in this tax year: the £10,000 you took out, plus the remaining £10,000 ISA allowance.
In contrast, if you withdraw money from a non-flexible ISA and replace it, the money you put back reduces your allowance for the tax year in which you replenish it. Using the above scenario as an example, if you took £10,000 out of a non-flexible ISA you would only be able to pay in £10,000 as that would mean you have paid in £10,000 in the current tax year.
There are a huge range of ISAs to choose from, and not all ISAs are created equal so it definitely pays to shop around for the best rate. If you need any help or advice with on choosing the right ISA for you, or you need help with investment management in general, please get in touch.