Is this ISA allowance calculation correct?
Posted by adfkamdf@reddit | AskUK | View on Reddit | 13 comments
Hi all I would appreciate much for the community's input if my understanding of ISA allowance is correct. A hypothetical scenario:
Tax year 2025/2026: Has £20k in cash ISA with provider 1
Tax year 2026/2027: Contributed £10k fresh funds in cash ISA with provider 2 with higher interest rate, so also withdrew £10k from provider 1 and put it in provider 2
I did not ''transfer'' my £10k between two accounts, but instead withdrew from provider 1 and then deposit into provider 2.
Am I right to say that I could still deposit £20k more for the current tax year (£10k from this tax year's allowance + £10k of ''replaceable'' fund that I withdrew from provider 1)?
Many thanks
huskydaisy@reddit
As far as I was aware if you didn't use the formal transfer process then the funds you took out and then paid in now count as a new deposit for the current tax year, but in all fairness I'm not in your tax bracket.
Also r/UKPersonalFinance might be a good resource.
nivlark@reddit
It's complicated by the fact that increasingly many ISAs are what's known as flexible ISAs, which have less strict rules. Within a single tax year, you can move money in and out of any number of flexible ISAs completely freely. And across two tax years (which is OP's situation) you can still withdraw money but it must go back into the same ISA.
huskydaisy@reddit
Oh, good. Just the other day I was thinking to myself how much better it would be if tax rules got more nuanced/complicated.
snaphunter@reddit
You're going to love April 2027
No_Usual_572@reddit
You have 10k left for this taxable year as you did not transfer the funds.
The way you should think about it is that you have 20k per year that you can deposit. That's it. You have already deposited 10k out of your 20k allowance.
nivlark@reddit
You can deposit £10k into the ISA with provider 1. You cannot deposit anything into the ISA with provider 2.
Of course this restriction is a bit arbitrary, because nothing stops you from making that deposit and then transferring the total balance to provider 2 (via the proper procedure). It exists because of a limitation in the way the ISA system works and is not intended to genuinely limit your options.
Haurian@reddit
Massively depends whether Provider 1 is a Flexible ISA.
Under normal ISA rules, the "transfer" i.e. withdrawal and deposit counts as a fresh subscription. So this year you have:
This counts as £20,000 subscribed which is your full allowance.
The difference if Provider 1 is a Flexible ISA is that you can re-deposit that money back into Provider 1's ISA.
Essentially, at the end of the year each provider will tot up the contributions you have made and report that figure to HMRC. If across all providers you exceed the £20,000 limit then it gets messy and you/the banks need to correct it, potentially cancelling the ISA account and being charged tax on any gains.
Flexible ISAs deduct in-year withdrawals from contributions, so withdrawing £10,000 then re-depositing it counts as 0.
The proper way to move funds between ISAs is a proper in-ISA transfer. Partial transfers are a thing but it depends on both provider's rules.
OkPea5819@reddit
If provider 1 is a flexible ISA you can replace £10k to that account in this tax year.
Under no scenario would you still have £20k allowance.
Xivii@reddit
10k more.
Provider 2 will report that you’ve deposited £20k. 20k is the max, so any new money added into any account will show as over-subscribed.
If the ISA at provider 1 is flexible, you can replace the 10k you took out of that. It would need to be put back into that account though (though could then be transferred elsewhere).
techbear72@reddit
I think not, because even if they are flexible ISAs you only get £20k total for a tax year and even though that £10k is from last tax year, you’ve also used it in this tax year because you didn’t do an ISA to ISA transfer.
mantolwen@reddit
No, the withdrawal and deposit used up the second £10k of your allowance so you have none left. If you had transferred it, you would have £10k left.
Eggtastico@reddit
No
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