Cash ISAs explained
Find out more about cash ISAs with our guide
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A Flexible ISA is a type of Individual Savings Account (ISA) that offers you the ability to withdraw money and then deposit it back into the same ISA within the same tax year without it counting towards your annual ISA allowance. This added flexibility can be beneficial if you think you might need access to your savings during the year but still want to maximise your tax-free savings.
In the UK, everyone over 18 has an annual ISA allowance, which is £20,000 per tax year. This limit applies to the total amount you can deposit into all types of ISAs (cash, stocks and shares, lifetime, etc).
With a standard (non-flexible) ISA, any money you withdraw and then re-deposit will count towards this annual limit. However, a flexible ISA allows you to take money out and put it back in the same tax year without affecting your £20,000 allowance.
The key is that the money must be replaced in the same flexible ISA account from which it was withdrawn and within the same tax year (April 6th to April 5th the following year).
You deposit £20,000 into your ISA (full annual allowance).
Later, you withdraw £5,000 for an unexpected expense.
Because your ISA is flexible, you can re-deposit the £5,000 before the tax year ends, even though you have already deposited £20,000 this tax year.
✅ Key Benefit: You can withdraw and replace money without losing your ISA allowance.
You deposit £20,000 into your ISA (full annual allowance).
Later, you withdraw £5,000 for an unexpected expense.
In this case, the withdrawal still counts as part of your £20,000 allowance.
This means you can not re-deposit the £5,000 without exceeding the limit.
❌ Key Limitation: Once you withdraw money, you lose that part of your allowance for the year.
Here are the advantages and disadvantages of flexible ISAs
Greater Access to Savings: You can access your ISA savings if needed without permanently reducing your tax-free saving potential for the year.
Flexibility for Unexpected Expenses: Provides a safety net for unforeseen circumstances without impacting your ISA benefits.
Short-Term Needs: Can be useful for short-term savings goals where you might need to access funds but want the interest earned to be tax-free.
Not All ISAs are Flexible: Flexibility is not a mandatory feature, so you need to specifically choose a flexible ISA.
Money Must Be Replaced in the Same Tax Year: To retain the allowance benefit, any withdrawn funds must be re-deposited into the same flexible ISA before the end of the tax year.
Potential for Over-Withdrawal: While flexible, making too many withdrawals could deplete your savings and reduce the potential for tax-free interest growth.
Yes, you can typically transfer funds from an existing ISA (whether flexible or not, and held with the same or a different provider) to a new flexible ISA.
You will usually need to complete an ISA transfer form provided by the new ISA provider. It is crucial to use the official transfer process and not withdraw the money yourself and re-deposit it, as this could lose its tax-free status and count towards your current year's allowance. Transfers do not use up your annual ISA allowance.
Yes, just like cash ISAs, stocks and shares ISAs can also be flexible. This means that if you have a flexible stocks and shares ISA, you can withdraw investments and then re-invest those funds within the same tax year without impacting your annual ISA allowance of £20,000.
This allows you greater control over your investment strategy during the tax year. For example, you might withdraw to rebalance your portfolio or take profits, knowing you can stay within the £20,000 allowance.
When comparing flexible ISAs, consider the following:
Look for competitive interest rates to maximise the tax-free returns on your savings
Ensure the account offers the level of access you need. While many easy access Cash ISAs are flexible, other flexible ISAs might have limitations on the number or amount of withdrawals.
If you have existing ISAs with other providers, check if the flexible ISA accepts transfers in. Transfers preserve the tax-free status of your money and do not count towards your annual allowance
Consider the reputation of the financial institution and the quality of their customer service. Check if you can manage your account online or via an app
MoneySuperMarket has won the Feefo Platinum Trusted Service Award, an independent seal of excellence, which recognises businesses that consistently deliver a world-class customer experience.
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Any UK resident over the age of 18 can hold a full cash ISA – and save up to £20,000 in their name.
Cash ISA funds deposited with UK providers who are authorised and regulated by the Financial Conduct Authority (FCA) are protected by the Financial Services Compensation Scheme (FSCS). This scheme protects your money up to a maximum limit of £85,000 per person (£170,000 for a joint account), per authorised firm.
Be aware some finance brands are part of the same authorised banking group. If you have more than the £85,000 limit in cash savings it is worth spreading your money across different banking groups to get maximum protection.
That depends on the particular cash ISA you chose. But typically the interest is calculated daily and will be paid monthly, or at the end of the term.
No. This is because the tax benefits of cash ISAs are intended for individuals and consequently can only be held in one name.
However, you could still benefit from tax-free savings by transferring your money into your partner’s account to take advantage of their annual allowance.
You can compare savings accounts using a number of factors. These include the interest rates they offer as well as how long the rate will last, the amount you might need to deposit in order to open the account, and how you can access the account. Once you’ve decided which account you want, simply click through and you’ll be taken to the provider’s website.
Not sure what type of account to go for? Our Savings Decision Tree can help you decide.
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