The Courtiers Flexible ISA

Although it is better to leave your savings where they are so that your money can keep growing, sometimes circumstances require getting hold of cash unexpectedly.

Having peace of mind that you can benefit from your full ISA allowance and have access to your money will be important for many households from a cash flow basis; for example to settle an unexpected bill or purchase, when you may not have the funds in hand, but know that you will at a later date in the tax year.

Any withdrawals from a non-flexible ISA cannot be replaced without the replacement amount counting towards the annual subscription limit.

Any monies withdrawn from an ISA offering flexibility must be replaced by the end of the tax year in which they were withdrawn, after which time the ability to replace them is lost.

Current Year Monies Only

When current year monies only are withdrawn from a flexible ISA this increases the available capacity to invest in any valid combination of ISAs.

Example

• 6 April 2024: £20,000 subscription made to the Courtiers ISA
• 1 August 2024: £5,000 withdrawal

The above results in a ‘net’ current year subscription of £15,000 (£20,000 -£5,000)

You can replace the £5,000 back into your Courtiers Stocks & Shares ISA. Alternatively, you could subscribe up to £5,000 into another Stocks & Shares ISA, a Cash ISA, an Innovative Finance ISA and/or a Lifetime ISA*.

* Lifetime ISAs are not flexible and not designed for withdrawals.

Combination of Current year and previous year monies

If you have built up previous year ISA subscriptions in your Courtiers ISA, you can also make withdrawals over and above anything subscribed in the current tax year, as long as these are covered by the current value of your ISA.

Example 1 – current year subscription then a withdrawal

• 6 April 2024: £20,000 subscription made to the Courtiers ISA
• 1 August 2024: £30,000 withdrawal made
  (assume for illustration purposes the total current value of Courtiers ISA, including previous year
  subscriptions is £40,000 which more than covers the withdrawal)

The above results in a ‘net’ current year subscription of – £10,000 (£20,000-£30,000)

This is because any monies withdrawn from previous year ISAs are calculated as a negative net balance against the current year subscription amount.

Important note– a negative balance can only ever be replaced in the same ISA from which it was withdrawn.

You could therefore still subscribe in the current tax year up to £20,000 into any combination of Stocks & Shares, Cash, Innovative Finance or Lifetime ISAs, but if you want to replace some or all of it into a Stocks and Shares ISA you can only replace it back into your Courtiers ISA.

The additional £10,000 withdrawn can also only be replaced back into your Courtiers ISA before 5 April 2025, after which time the flexibility to replace the funds is lost.

5 April 2025: £30,000 replaced into Courtiers ISA.

This results in previous years’ monies being replaced first, and a ‘net’ current year subscription of £20,000.

The total value of your ISA after replacement will, of course, depend on market conditions, as the value of your investments fluctuates.

Example 2 – withdrawal prior to current year subscription

6 April 2024: £10,000 withdrawn – from previous year funds
1 August 2024: £10,000 replaced – replacement of previous year funds
1 December 2024: £10,000 subscription – net current year subscription is £10,000

This would leave a remaining available ISA allowance of £10,000 in the current tax year.

Withdrawals and subscriptions are treated in date order.

No. there are strict rules about the order of withdrawals and replacement of funds which are as follows:

Withdrawals

• Firstly current year subscriptions
• Secondly previous year accrued subscriptions

Replacements

• Firstly previous year accrued subscriptions
• Secondly current year subscriptions

No, you can make a partial replacement of funds which would be treated in the order described above.

Example

6 April 2024:                   £20,000 subscription made
1 August 2024:                £30,000 withdrawn (from current and previous year subscriptions)
5 April 2025:                    £20,000 replaced

The replacement funds would firstly be applied to previous year funds (£10,000) and the other £10,000 treated as a current year subscription.  This results in a ‘net’ current year subscription of £10,000 (£20,000-£20,000+£10,000).  As this is the final day of the tax year, the remaining available £10,000 subscription allowance for the current year will now expire and the ability to use it will be lost.

Any income withdrawn on an ad hoc or regular basis counts as a flexible withdrawal, and could therefore be replaced.

Yes but there are some things to bear in mind.

As the Courtiers ISA is a Stocks and Shares ISA the current value of your ISA is unlikely to be the same as the amount you originally subscribed due to stock market fluctuations.  Timing of withdrawals can therefore be an important consideration.

Your ISA may have grown in value due to receipt of interest, dividends and market growth, but it could also have dropped in value due to economic conditions or other factors leading to a fall in world stock markets.

You are limited to replacing the value of funds withdrawn, and not the original subscription amounts, so you could be disadvantaged if you withdraw funds when the value has fallen, as investments may be sold at a depressed price and when you replace funds the market/fund prices may have risen again, and the investments would be bought back at a higher price, resulting in purchasing less units than you originally sold.

Example 1 (Depreciation)

Tax year 2022/23:              subscribed £20,000
Tax year 2023/24:             subscribed £20,000
Tax year 2024/25:             subscribed £20,000
Total subscriptions:                               £60,000

Current value of ISA at time of withdrawal request: £55,000 (markets and ISA have fallen in value).

Withdrawal in full: £55,000 current value (treated as withdrawing £20,000 current year subscription first, the remaining £35,000 relates to accumulated value of previous year ISAs).

Replacement of funds: £55,000 permitted before end of current tax year. (treated as replacing previous year funds first then current year subscription). Effectively, £5000 of previous year subscriptions have been ‘lost’ as you can only replace the amount withdrawn, and not the full £60,000 of subscriptions originally made.

Example 2 (Growth)

Tax year 2022/23:         subscribed £20,000
Tax year 2023/24:        subscribed £20,000
Tax year 2024/25:        subscribed £20,000
Total subscriptions:     £60,000

Current value of ISA at time of withdrawal request; £65,000 (ISA has grown in value).

Withdrawal in full: £65,000 (treated as withdrawing £20,000 current year subscription first, the remaining £45,000 relates to accumulated value of previous year ISAs).

Replacement of funds: £65,000 permitted before the end of current tax year. (treated as replacing previous year funds first, then current year subscription).

Effectively, by withdrawing the full value, £5,000 could be treated as tax free profit and not replaced, although you are entitled to replace the whole £65,000 if you wish. Also, note that although some profit has accumulated and is reflected in the current value, you may potentially still be withdrawing funds at a time when markets have fallen.

One further thing to bear in mind is that a full withdrawal could result in Courtiers closing your ISA account. As long as you repay the funds before the end of the same tax year as they were withdrawn, the account may be re-opened to facilitate this.

Non-residents can use flexibility to withdraw and replace previous year ISA monies. However, this is subject to individual ISA manager terms and conditions. The Courtiers ISA does permit this service.

The withdrawal amount is not limited to the amounts previously subscribed; it is the current value of the ISA that can be withdrawn and replaced.

This may include gains accrued, however, where the value of the ISA has fallen, only the lesser current value may be withdrawn and replaced rather than the actual subscriptions made.

In all cases, only replacement of funds can be made – no new monies can be subscribed by non-residents.

Flexibility is only transferable in relation to the ‘net’ current year subscription amount.

Any negative net current year subscription amounts are capped at £0 so that negative amounts cannot be transferred to a new ISA Manager.

Remember that not all ISA Managers offer flexibility. ISA Managers are not required to accept transfers in but they must allow transfers out upon request.

Examples of transfers- net subscription amounts:

Example 1

Current year subscription made £10,000
Withdrawal made £20,000

This gives a current year ‘net’ subscription of £0 in terms of a transfer to another ISA Manager. The negative £10,000 balance from previous year monies is not transferred, therefore the ability to replace it is lost with the new manager.

Example 2

Current year subscription made £10,000
Withdrawal £10,000

This again gives a ‘net’ current year subscription of £0 to transfer to the new manager. However, because all the monies withdrawn relate to the current year subscription made, this provides full £20,000 headroom with the new manager – no flexibility allowance is lost.

Example 3

Current year subscription made £10,000
Withdrawal £5,000

The ‘net’ current year subscription amount to transfer is £5,000, no flexible allowance is lost, and a further £15,000 can be subscribed with the new manager.

In each case the ISA Manager making the transfer will provide the ‘net’ current subscription to the new ISA Manager, to enable them to ascertain how much, if any, further subscription amounts can be made in the current tax year.