Copy article

Flexible ISAs

ended 13. April 2023

A journalist at the Daily Express is seeking views from IFAs and wealth managers on the benefits of using a flexible ISA/flexible stocks and shares ISA to invest. What are they, and are there any downsides?

5 responses from the Newspage community

Copy all

Copy

Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
There are so many types of ISAs it's easy to get confused, but flexible ISAs can be either cash, investment or innovative ISAs. A flexible ISA allows you to withdraw from an ISA you have made a contribution to in the same tax year, and replace the withdrawal later in the tax year without it affecting your annual limit. If you withdraw from other ISAs, you cannot put this money back it, so a flexi ISA gives you more optiosn for cash flow, but only in the given tax year.
Copy

Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
ISAs are even more compelling now given the recent changes to capital gains tax allowances and income tax bands being frozen. Flexible ISAs allow money to be withdrawn and replaced in the same tax year without using up any further allowance. This can be useful if there's a short-term, temporary need for the money held in the ISA, but there's a plan to get it back in before the end of the tax year. Many providers now offer this feature as standard. That being said, when it comes to stocks and shares ISAs, for money that's only needed temporarily it's important to consider the risk of being out of the market, and for us to recommend this to our clients there would need to be a very good reason.
Copy

Patryk Dyjecinski
Director at Clara Wealth Management
Many of the better ISA providers have now made their ISAs flexible. This gives you the ability to withdraw the funds in your ISA and replace them before the end of the tax year without losing that year's allowance.
While the use of this feature is somewhat limited, they have been useful for clients that expect a future lump sum or require their ISA funds for a short-term project and have an offset mortgage. By borrowing the funds for just a few days over the tax year end, contributing to their ISAs and withdrawing shortly into the new tax year, they can 'carry forward' their annual ISA allowances for when the funds are available to invest. This was of course a more cost-effective exercise when interest rates were at rock bottom.
Copy

Daniel Jones
Lifestyle Financial Planner at DGS Chartered Financial Planners
The main benefit of flexible ISAs is the ability to re-deposit any money you have withdrawn within the tax year, without it affecting your annual contribution limit. To take full advantage of this facility, you ideally need to have used your full £20,000 allowance. If you'd made your £20,000 contribution at the start of the tax year, and subsequently needed access to funds, you could withdraw from your ISA and be able to pay the money back in before the end of the tax year. This can be a big advantage over ISAs that are not flexible. If you have not contributed your full £20,000, though, you may find this feature of little use. Let's say you'd contributed £15,000 to your ISA but unexpectedly needed £5,000 back for an unforeseen expense. You could still pay that money back to your ISA without exceeding the limit as you had £5,000 of your allowance remaining. As ever, it depends on your own circumstances as to how much benefit this facility offers you.
Copy

Stuart Crispe
Founder at Sunny Avenue
Flexible ISAs are a great solution if you plan on taking money out during the tax year or if you run into short-term financial issues. Suppose you're purchasing a car and waiting for the sale of your old car. In that case, you can withdraw your balance, pay for the car, sell the old car, and replace your original balance all without affecting your ISA allowance. Most providers are already setting their ISAs to be flexible by default. The best thing to do is contact your provider to find out what restrictions your ISA has in place. You must replace your allowance before the end of the tax year, otherwise you lose your allowance.