From April 6th 2016 increased flexibility will be introduced for ISAs.
The current rules state that you can save a maximum £15,240 (for the 16-17 tax year) into an ISA each year. Where you withdraw cash from your ISA and subsequently replace all, or some, of that cash, the replacement counts as a new subscription for the purposes of the annual limit.
Furthermore, other than in specified circumstances, you can only subscribe to one cash ISA and one stocks and shares ISA each year to use up your annual allowance.
From April 2016, you will no longer be penalised for needing access to your ISA cash, if you then want to save more later on that tax year. The only limit is that you need to top up your ISA during the same tax year the withdrawal was made – if you don’t it will count towards your new allowance in the subsequent tax year.
Where will it apply?
This flexibility will be available in relation to both current year and earlier year ISA savings where provided for in the terms and conditions of a ‘flexible’ ISA, but will be subject to conditions in certain cases about which ISA provider can accept replacement amounts.
ISA providers can offer this flexibility for cash ISAs and also for cash that is held in stocks and shares ISAs.
In certain circumstances where you make a payment that does not count towards the ISA subscription limit, it will also be possible for you to subscribe to more than one cash and one stocks and shares ISA in a year.
But beware – the flexible ISA facility is not transferrable. That means if you have withdrawn money but not replaced it, you won’t be able to make the repayment with your new provider.
The new flexible rules will ultimately benefit you if you wish to access and replace your ISA savings in the same tax year