Flexible ISAs

The flexible ISA was introduced in April 2016, as a way of giving savers the chance to the make the most of their annual ISA allowance.

 

What is a Cash ISA?

Just like a savings account, a Cash ISA (Individual Savings Account) is a safe, secure way to store your money. The only difference is that any interest you earn on your savings is tax-free.

What are the benefits of an ISA?

There are many reasons to opt for a Cash ISA over alternative savings accounts. Not the least of these, is that they’re a great way of saving for your future. Other benefits include:

  • Currently, all basic rate taxpayers can earn £1,000 of tax-free savings interest per year, under the Personal Savings Allowance (PSA). However, there is no guarantee that this won’t change in the future. With ISAs, you’re guaranteed your savings will always be tax-free. Investing your allowance each year means you can grow your savings without having to pay any tax.
  • If you were to opt for an alternative regular savers account and savings interest rates increased, the money you’d saved may tip you over the Personal Savings Allowance limit.
  • Some types of Cash ISA come with the added benefit of government boosting. For example, the 25% government bonuses offered with Help to Buy ISAs and Lifetime ISAs. 

Are ISAs tax-free?

Yes, with a Cash ISA you can rest assured your savings are not only tax-free, but safe from changing regulations.

The only time when a Cash ISA isn’t exempt from tax is if you are aged 16 or 17 years old, and the money in your account is a gift from a parent. If this is the case, your parents may have to pay tax if parental settlement rules apply.

Cash ISA rules

  • To be eligible for a Cash ISA, you must be aged 16 or over and a UK resident. The only exception to this is in the case of Lifetime ISAs, that require you to be 18 years old
  • You can only open one Cash ISA per year
  • You have a single ISA allowance each year, which you can divide between a Cash ISA, a stocks and shares ISA, an Innovative Finance ISA and/or a Lifetime ISA. With a Lifetime ISA, the maximum allowance is £4,000 each year, meaning you have up to £16,000 to split between the other types

How much can I put in an ISA?

The total amount you can put into a Cash ISA for the 18/19 tax year is £20,000. This is known as the ISA allowance and is available to every person over 16 in the UK. You have the choice of using up the maximum allowance in one account, or splitting between the different types of ISA products.

Any interest your ISA earns doesn’t count towards your Personal Savings Allowance.

When is the ISA deadline?

The ISA deadline is midnight on 5th April each year; this is the end of the tax year. Any unused allowance doesn’t roll over into the new tax year, so you should try to make the most of your allowance before the deadline comes around. For more information on the ISA deadline, refer to our ISA deadline guide.

What are the different types of Cash ISA?

There are a number of different Cash ISAs available to help you achieve your savings goals. Whether you’re saving for your first home or setting up a nest egg for your golden years, there’s an option to suit you.

Fixed Rate ISAs

A Fixed Rate ISA pays a guaranteed amount of interest for a set period of time, from six months to five years. Though withdrawals are permitted, they’re subject to penalties. Consequently, a Fixed Rate ISA is better suited to those who won’t need immediate access to their savings.

Help to Buy ISAs

A Help to Buy ISA is a government scheme designed to help you save for a mortgage deposit on your first home. To qualify, you can’t own a property anywhere in the world.

You can save up to £200 a month in a Help to Buy ISA, and they come with the added bonus of government contributions. In this case, your savings could be boosted by 25%. The minimum government bonus is £400, so you will have to have saved at least £1,600 to qualify for a government bonus.Please note, Help to Buy ISAs are due to be withdrawn in November 2019.

Lifetime ISAs

A Lifetime ISA is a tax-free savings account that also offers a government bonus of 25% on top of the money you put in, up to a maximum of £1,000 a year. With a Lifetime ISA, you can deposit as much as £4,000 per year until the age of 50. Lifetime ISAs can only be opened and funded by those aged 18 to 39.

Junior ISAs

Junior ISAs are tax-efficient ways of saving for your little one’s future. You must be 16 or over and a UK resident to open a Junior ISA on behalf of a child, or be a child aged 16 to 18 to open one for yourself. The Junior ISA allowance for 2019/20 is £4,368.

Find everything you need to know about Junior ISAs here.

Refer to our Cash ISA page to discover the full range of ISAs available with Newcastle Building Society.

How many ISAs can I have?

You can have multiple ISAs at one time, but you can only open or pay into one of each type of ISA using your £20,000 allowance. 

Though you can only open one Cash ISA each tax year, there’s no limit to the number of ISA transfers you can make, should you spot a better interest rate with another provider. However, with Newcastle Building Society, you can open multiple cash ISAs using our CustomISA service. You can find more about that here.

What happens if I take money out of my ISA?

Withdrawals are permitted from most ISAs. However, if you make a withdrawal from a Fixed Rate ISA, you will be subject to a penalty in the form of a loss of interest on your savings.

If you think you will need access to your savings quickly, then you may be best suited to an ISA that doesn’t penalise withdrawals.

In relation to the Lifetime ISA a penalty of 25% of the withdrawal amount will be deducted unless the funds are being used for either:

  • Buying your first house (the account must have been held for a minimum 12 months)
  • You reach the age of 60
  • You are diagnosed with a terminal illness and have less than 12 months to live

Can I transfer my ISA to another provider?

You are permitted to unlimited transfers each tax year. However, you should always check that your new provider accepts transfers, as not all banks and building societies are obliged to do so

Avoid withdrawing money from your ISA yourself, as your savings may lose their tax-free status!

There are a number of reasons you may want to transfer to a new provider. For example, if you’ve spotted better rates elsewhere. Read our complete guide to the ISA transfer process for more information.

Can I inherit an ISA?

If your spouse or civil partner passes away, you will be eligible to receive an Inheritance ISA Allowance. Read more information about inheritance tax allowance in our helpful inheritance tax allowance guide.

Applying for a Cash ISA with Newcastle Building Society

If you'd like to apply for a Cash ISA at Newcastle Building Society, the process is really simple. We also accept ISA transfers, including Lifetime ISAs. To get the ball rolling, simply browse our Cash ISA product range or contact us.​

The basic concept is that money can now be moved in and out of an ISA, without this counting towards your annual ISA allowance – as long as the money is replaced within the same tax year.  Below, we’ve put together a guide on flexible ISAs, with a breakdown of flexible ISA rules and how flexible ISAs work.

  • What is a Flexible ISA?
  • Flexible ISA Rules
  • How does a Flexible Cash ISA work?
  • How does a Flexible Stocks and Shares ISA work?
  • How do I know if my ISA is flexible?
  • FAQs
  • What happens if I take money out of my ISA?
  • What is a CustomISA?

What is a flexible ISA?

With a flexible ISA, you can enjoy more flexibility on your savings. You can transfer money in and out of an ISA without this counting towards your annual tax-free allowance, as long as the funds are replaced within the same tax year. The tax year ends at midnight on 5th April. For more information on the ISA deadline, why not refer to our guide here?

To compare, prior to the introduction of ISA flexibility in 2016, if you were to take money out of your ISA this would still count towards your annual ISA allowance.

Flexible ISA rules

  • Flexibility can apply to both Variable / Fixed Rate Cash ISAs and Stocks and Shares Cash ISAs
  • ISA flexibility is not available on Help to Buy: ISAs, Junior ISAs or Lifetime ISAs
  • Not all ISA providers have to offer ISA flexibility
  • ISA flexibility only applies to your active ISA accounts

How does a flexible Cash ISA work?

If you had £10,000 saved in your ISA, you could add £10,000 that same year as per the £20,000 annual allowance.

If you were to withdraw £2,000, leaving the account balance at £8,000, you could still save £12,000 into your ISA during the current tax year. This is ISA flexibility.

On the other hand, an ISA without flexibility would count the withdrawn £2,000 towards your allowance and you would only be allowed to save £10,000 for the rest of the tax year.

How does a flexible stocks and shares ISA work?

When it comes to a flexible Stocks and Shares Cash ISA, the rules are exactly the same as flexible Cash ISAs, in that you can freely withdraw investments and reinvest without this counting towards your annual ISA allowance.

How do I know if my ISA is flexible?

Not all banks and building societies are required to offer flexible ISAs, so it’s important to check the terms and conditions or speak to your ISA manager, before making any withdrawals.

If your ISA is not flexible, making a withdrawal and then paying funds back into the account will be classed as a subscription and will count towards your annual allowance.

Here at Newcastle Building Society, we’ve already made most of our Cash ISAs flexible, including old accounts no longer available to new customers.

Frequently asked questions

What happens if i take money out of my ISA?

Taking money out of an ISA doesn’t mean your savings will lose their tax-free status, however you should always refer to the terms of your ISA. This is because some accounts, such as fixed term ISAs, may penalise early withdrawals. For more information on this, see below.

  • Instant Access ISAs

Instant access Cash ISAs allow you to withdraw money whenever you want, without any restrictions. This makes them a good option if you think you will need access to your money with short notice.

  • Fixed Rate ISAs

With fixed term Cash ISAs, your money is locked away for a set period of time. Though you can withdraw money from a Fixed ISA, you will usually have to pay a penalty. For example, you may lose a set number of days’ interest.

For more information on ISA withdrawal rules and allowances, read our complete guide to Cash ISAs.

What is a CustomISA?

Just like standard ISAs, flexible ISAs can be either Cash ISAs or Stocks and Shares Cash ISAs. While you can still only subscribe to one Cash ISA and one Stocks and Shares ISA each tax year, whether or not these are flexible, with Newcastle Building Society’s CustomISA facility, you can spread your annual tax-free allowance across as many ISA products as you like.

This means you no longer need to choose between locking your money away for a longer period in order to get the best interest rate, or settling for a lower rate. Our CustomISA allows you to split your money between several accounts.                                    

We hope you have found our guide to flexible ISAs useful. Should you need any more ISA guidance, don’t hesitate to get in touch with our helpful Savings team who will be happy to answer any questions you may have. Alternatively, pop into your nearest Newcastle Building Society branch.