As of 11 July 2024, the Freetrade ISA is flexible.
The key difference between a flexible ISA and a non-flexible ISA lies in the treatment of withdrawals and top-ups.
When you withdraw from a non-flexible ISA, your withdrawals are not added back to your annual allowance. Effectively, you lose that part of your allowance because you can’t return it to your ISA.
Withdrawals from a flexible ISA are added back to your annual allowance. So you can return any cash you withdraw back into your flexible ISA within the same tax year.
When you withdraw from a flexible ISA, your withdrawal will be added back to your annual allowance first (assuming you’ve made contributions in the current tax year). Any withdrawals exceeding your current year’s contributions are displayed as “flexible withdrawals” in your app.
After you’ve made a withdrawal, any top-ups you make will fill your annual allowance first. Your flexible withdrawal balance will be filled second.
Both your annual allowance and your flexible withdrawal balance expire at the end of each tax year (5 April at midnight).
Topping up & withdrawing money in the same tax year
Example: You put £10,000 into your ISA and then decide to withdraw £5,000 in the same tax year.
If your ISA is not flexible, the withdrawal won’t be added back to your annual allowance. Although you now have only £5,000 in your ISA, your remaining allowance is still £10,000 (rather than £15,000). Effectively, you have lost £5,000 of your annual allowance.
The Freetrade ISA is flexible, so the withdrawal will be added back to your annual allowance. You have £5,000 in your ISA, and can still put another £15,000 away before the end of tax year. You haven’t lost any of your allowance.
Topping up & withdrawing money from previous year(s)
Example: You have £50,000 in your ISA from previous tax years and have not made any ISA contributions this tax year. You withdraw the £50,000.
If your ISA is not flexible, you will only be able to put £20,000 back into your ISA (i.e. you’d have to use this year’s £20,000 allowance). You won’t be able to put the remaining £30,000 back.
The Freetrade ISA is flexible, so you can put the full £50,000 back into this same ISA by the end of the tax year (5 April at midnight). These are your flexible withdrawals. Plus, you still have your remaining £20,000 annual allowance for the current year to use. You will be able to put a total of £70,000 into your ISA this year (returning £50,000 in flexible withdrawals plus your £20,000 annual allowance for the current year), assuming you haven’t made ISA contributions elsewhere.
Topping up & withdrawing money from current and previous year(s)
Example: You have £50,000 in your ISA from previous tax years and have topped up your ISA with £20,000 in the current tax year. You withdraw £30,000.
If your ISA is not flexible, you won’t be able to make any further top-ups into any ISA for the remainder of the tax year. This is because you’ve used your £20,000 annual allowance, and any withdrawals won’t be added back to your annual allowance. In effect, you’ve lost your full £20,000 annual allowance for the year.
The Freetrade ISA is flexible, so you can put the full £30,000 back before the end of tax year. The first £10,000 returned will fill your flexible withdrawal balance, and the remaining £20,000 will fill your current year’s annual allowance.
Your ISA resets each tax year
Your ISA allowance resets on 6 April each year.
Neither your £20,000 annual allowance, or any flexible withdrawals, can be carried over.
If you don’t return any cash you’ve withdrawn by the end of tax year, you’ll lose that part of your allowance.
It’s important to note that your flexible withdrawals can only be put back into the same flexible ISA. They can’t be put into another ISA, even if that ISA is also flexible.