Can I move cash into my S&S ISA before 5 April, and take it out afterwards, to take advantage of my remaining allowance?

[pcippy]

Dear UKPF,

I have about 3k of my ISA allowance left for this tax year.
I have about 3k cash however I can't invest this at the moment I need to pay rent, bills etc. However I want to max out my allowance.

Can I put this 3k cash into my ISA on the 4th of April, "park it" until the tax year rolls over, and hence max out my 20k allowance for the year? I would then be looking to take it out in two days, pay bills etc, Then I would like to pay it in again but still have my full £20k allowance leftover, as the 3k is from a prior tax year at that point in time.

Would this work?

 

[gabrielleb]

@pcippy You need to use a Flexible ISA to be able to insert again without utilising next years allowance. Not all ISAs are flexible, you need to check specifically. Vanguard and Charles Stanley Direct both do Flexible S&S ISAs, although you might have left it a bit late if you're not already registered - last I heard Vanguard have a 6 week delay on verifying accounts. https://ukpersonal.finance/isa/

 

[pcippy]

@gabrielleb Thanks a lot for your reply.
I have a Vanguard S&S ISA. From this webpage it seems it is flexible by default
https://www.vanguardinvestor.co.uk/need-help/answer/is-the-vanguard-isa-a-flexible-isa
I believe this means my plan will work, but please tell me if I am wrong.

 

[gabrielleb]

@pcippy Yes, that's correct.

 

[zrcalo]

@pcippy yup can confirm it's true!

 

[pcippy]

Thank you @TheRealWhoop, it seems my plan will indeed work.
The key is that you need to have a flexible ISA.

 

[ronv]

@pcippy Have you read this (especially the how it works in practice bit)?

 

[sashieng]

@pcippy Yes but, I really don't see the point.

What are you trying to achieve by using up your allowance when you simply want to withdraw it in a few days? Simply don't use up your allowance.

 

[pcippy]

@sashieng Thanks for your reply.
I expect to be able to save more into my S&S this year (got a raise at work), easily hitting my 20k allowance.

I want to prepare as much as I can and not lose any tax advantages. I feel by not using up my allowance this tax year I would essentially lose out on potential tax savings of £3k compounded many years into the future.

 

[sashieng]

@pcippy Ok, you are talking in terms of a Flexible ISA. That wasn't at the forefront of my mind when I posted so, I understand what you are trying to achieve.

 

[jjgodman]

@pcippy The idea of maxing out the allowance serves to maximise future tax-free gains. If you aim to take the money out in just a few days what's the point? Net result will be the same as if you only paid it in once in the next tax year.

 

[pcippy]

@jjgodman The aim is to be able to save £23k tax free vs. £20k.
My question therefore is whether this will enable me to do so

 

[filu63]

@pcippy Yep since you have a flexible ISA this will work.

 

[jjgodman]

@pcippy I see, I was not aware of Flexible ISAs either

 

[abdulrahman1subih]

@pcippy I don’t think you are right here.

If you put in 3k now before the 6th April, you will have utilised abs fully maxed out this years 2020/21 ISA limit.

If you then take it out a few days into the new tax year 2021/22, you have taken out 3k out of your ISA and hence lost the tax advantages of it being in the ISA (no income tax and no CGT on gains etc).

This has no impact on your 2021/22 ISA limit of 20k. You putting in the 3k and then only to take it out soon after and maxing out next years 20k limit, vs not putting in anymore and only maxing out next years limit of 20k is the same.

You only end up saying 20k tax free above what you already have in your ISA.

The only scenario where you save 23k tax free is if you put the 3k in and don’t take it out.

EDIT - ignore me. Apologies. I am wrong. OP is correct, his strategy does work. You can take out money from previous years subscriptions, provided you replace the money in the same year you took it out without impacting your allowance.

 

[abdulrahman1subih]

@pcippy My understanding of flexible ISAs is that you can only take out money that you have contributed that same tax year without it impacting yo ur ISA allowance limit for that tax year.

Happy to be wrong but like others in this post, I don’t really see the point in putting the 3k in now to max out the 2020/21 20k limit only to take it out a few days later at the start of the 2021/22 tax year? Am I missing something?

Taking out the 3k at the start of 2021/22 tax year has no impact on the 2021/22 tax year 20k limit.

Flexible ISAs - of the OP put in 3k at the start of 2021/22 tax year and this was in a flexible ISA, he would then be able to take that 3k back out but still would have a 20k limit for 2021/22.

HL S&S ISAs are not flexible just FYI.

EDIT - ignore me. Apologies. I am wrong. OP is correct, his strategy does work. You can take out money from previous years subscriptions, provided you replace the money in the same year you took it out without impacting your allowance.

 

[zenia]

@pcippy If I understand correctly, you put it in this tax year and take it out next tax year and then put it in again next tax year, it will be using 3k of this years and next years allowance. 3k contributed 20/21 and in 21/22.

 

[pcippy]

@zenia Strange, this is what I feared as well. When I previously talked with companies who offer ISAs, they said that the allowance only takes into account "net flows" in any given year. Therefore if I take out 3k in any year and put in 23k, it will still count as only 20k contributed, not 23k as you said. But I could be wrong.

 

[gabrielleb]

@zenia You can reinsert without using next years allowance if you're using a Flexible ISA.

 

[jakson90]

@pcippy Most S&S ISAs aren’t flexible so you can’t withdraw and redeposit without affecting your allowance.

But do you need to, will you be maxing your allowance next year too?