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The flexible ISA was introduced in April 2016, as a way of giving savers the chance to make the most of their annual ISA allowance. 

The basic concept is that money can now be moved in and out of an ISA, without this counting towards your annual ISA allowance – as long as the money is replaced within the same tax year.

What is a flexible ISA?

With a flexible ISA, you can enjoy more flexibility on your savings. 

You can transfer money in and out of an ISA without this counting towards your annual tax-free allowance, as long as the funds are replaced within the same tax year. The tax year ends at midnight on 5th April.

To compare, prior to the introduction of ISA flexibility in 2016, if you were to take money out of your ISA this would still count towards your annual ISA allowance.

Flexible ISA rules to be aware of
  • Flexibility can apply to both variable / fixed rate cash ISAs and stocks and shares ISAs
  • ISA flexibility is not available on Help to Buy ISAs, junior ISAs or Lifetime ISAs
  • Not all ISA providers have to offer ISA flexibility
  • ISA flexibility only applies to your active ISAs
How does a flexible cash ISA work?

If you had £10,000 saved in your ISA, you could add £10,000 that same year as per the £20,000 annual allowance.

If you were to withdraw £2,000, leaving the account balance at £8,000, you could still save £12,000 into your ISA during the current tax year. This is ISA flexibility.

On the other hand, an ISA without flexibility would count the withdrawn £2,000 towards your allowance and you would only be allowed to save £10,000 for the rest of the tax year.

Please note: ISA flexibility applies to accounts with the same provider.

What about stocks and shares ISAs?

When it comes to a flexible stocks and shares ISA, the rules are exactly the same as flexible cash ISAs in that you can freely withdraw investments and reinvest without this counting towards your annual ISA allowance.

How do I know if my ISA is flexible?

Not all banks and building societies are required to offer flexible ISAs, so it’s important to check the terms and conditions or speak to your ISA manager before making any withdrawals.

If your ISA is not flexible, making a withdrawal and then paying funds back into the account will be classed as a subscription and will count towards your annual allowance.

Here at Newcastle Building Society, we’ve already made most of our cash ISAs flexible, including old accounts no longer available to new customers.

What happens if I take money out of my ISA?

Taking money out of an ISA doesn’t mean your savings will lose their tax-free status, however you should always refer to the terms of your ISA. 

This is because some accounts, such as fixed term ISAs, may penalise early withdrawals. For more information on this, see below.

Easy access ISAs

Easy access cash ISAs allow you to withdraw money whenever you want, without any restrictions. This makes them a good option if you think you will need access to your money with short notice.

Fixed rate ISAs

With fixed rate cash ISAs, your money is locked away for a set period of time. Though you can withdraw money from a fixed rate ISA, you will usually have to pay a penalty. For example, you may lose a set number of days’ interest.

What is a CustomISA?

Just like standard ISAs, flexible ISAs can be either cash ISAs or stocks and shares ISAs. 

While you can still only subscribe to one cash ISA and one stocks and shares ISA each tax year, whether or not these are flexible, with Newcastle Building Society’s CustomISA facility, you can spread your annual tax-free allowance across as many ISA products as you like.

This means you no longer need to choose between locking your money away for a longer period in order to get the best interest rate, or settling for a lower rate.

Our CustomISA allows you to split your money between several accounts.                                   

We hope you have found our guide to flexible ISAs useful. Should you need any more ISA guidance, why not pop in to your local branch so we can talk you through your options? We’d love to see you and we’re always here to help you make the right decisions and connect you to a better financial future.

Branch colleague on Stokesley high street holding a coffee

Need some help?

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0345 734 4345

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