What is a flexible ISA and why doesn't every provider offer one?

In spite of having invested in ISAs for many years, I was unaware of ‘flexible' ISAs.

I had to encash a significant amount invested in ISAs, rather than taking a difficult-to-arrange bridging loan, earlier this year when we bought a new house before selling the old house. I only became aware of the flexible ISA when I queried a dialogue box with the platform provider (CSD) indicating that I could invest the amount that I had taken out. I then checked the relevant .gov website which confirmed that it was correct. Another platform provider (HL), where I also encashed a significant amount held in an ISA, just confirmed that their ISA is not flexible.

Are flexible ISAs common? Why would one provider offer a flexible ISA and another not? Why is there not more publicity about them? In my particular circumstance, having a flexible ISA (even 1) has offered great benefit.

Hi Robert,

Thanks for raising this - it’s a great question and you’re certainly not alone. Flexible ISAs catch a lot of people by surprise.

In a nutshell: a flexible ISA lets you take money out and put it back in again within the same tax year without it eating into your £20,000 annual allowance. So, if you need to dip into the ISA - for example to bridge a house purchase, as you have done - you can replace the money later that year and it doesn’t count twice.

As you have discovered, not every provider offers this though. HMRC introduced these new rules back in 2016, but it’s optional, not a requirement. Some providers have embraced it, others prefer to keep things simple and avoid the extra admin - so you’ll find that some ISAs (especially Cash ISAs) are flexible while others, like certain Stocks & Shares ISAs, aren’t.

A big reason for this is technology. Many providers still run on older, clunky IT systems, and building flexible ISA functionality can be expensive or tricky to integrate. Only those who see it as a real draw for customers tend to prioritise it. The good news is that the industry is gradually becoming more technologically adept as these legacy systems are replaced or upgraded, so features like this should become more common and less costly to offer over time.

It is surprisingly under-publicised as a benefit. Providers who don’t offer it aren’t likely to shout about it, and most people don’t think about temporary withdrawals until they suddenly need one - so the feature tends to stay hidden in the small print.

If you think you might need short-term access to your ISA money - say for a house move or a big one-off expense - it’s worth checking whether your provider has a flexible option before you withdraw.

While it would certainly help if these rules were better publicised, one way to stay ahead is to work with a qualified financial adviser. An adviser can ensure that everything you’re doing - across ISAs and your wider finances - is fully optimised for your own circumstances and goals.

Hope this helps!

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Important information

The information provided is for general guidance only and does not constitute personal financial advice or a recommendation. It is based on current understanding of HMRC rules and tax legislation, which may be subject to change. This response is intended to address your query in general terms; for advice tailored to your specific circumstances, a personalised financial review would be required. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.