Ask the Expert: Am I allowed to top up my ISA after a withdrawal?
Carl Lamb of Almary Green responds to our reader’s request for advice.
I put as much as possible into ISAs each year to help me save for the more expensive things like holidays and cars.
I’ve already put £20,000 in for this tax year as I inherited some money from my grandparents.
I need to spend about £6,000 in August for a holiday with my family so will take it out of my ISA but am expecting to get a bonus from work of about £3,000 in September.
Am I right in thinking I can now put this into my ISA, even though I’ve already put £20,000 in this year?
Response from Carl Lamb of Almary Green
Yes, you are right, in theory: since April 2016, the rules have allowed you to invest up to the total allowance in your ISA, take money out during the tax year and then top the ISA up again later – but only if it is in the same tax year.
So if you make a withdrawal in August, you would need to pay in before 5 April 2019 for it to count for your 2018/19 ISA allowance.
Once you pass the year end, it counts as new money against your new year’s allowance.
However, in practice not every ISA will allow you to do this so you need to ask your ISA provider if they allow flexible withdrawals.
If you have a fixed-term ISA – ie one where you have been given a preferential rate in return for agreeing to keep your money invested for a minimum period of time – you may well have to pay a penalty for accessing the money early and there may be no facility to top the ISA up again.
If it is really important to you to have the flexible withdrawal facility, you could potentially transfer all your current year’s ISA savings to a provider that does allow it – but again there may be penalties if fixed terms are involved.
If this is something you want to do, it’s critical to do it using a proper ISA transfer which is carried out by the new provider rather than taking the money out and passing it over.
Once you’ve withdrawn it from an account that is not offering flexible withdrawals, it will count as new money against your ISA allowance when you invest it in an ISA.