How is it different?
Many ISAs already allow you to get your hands on your money if you want to, but before the rules changed, any money taken out and paid back into the ISA still used up part of your annual ISA limit. If you'd already reached the limit of your allowance for this tax year, you wouldn't be allowed to put any more back in.
Under flexible ISA rules, you can take money out and still put it back, provided you pay it back in the same tax year. Effectively any withdrawals first reduce your current year contributions, and if you withdraw more than you’ve paid in this year then you create a ‘flexible allowance’.
For example, let’s say you have £40,000 in a cash ISA, made up of £35,000 built up over previous tax years, and £5,000 deposited in the current tax year. That leaves £15,000 of this year’s allowance. If you withdrew £10,000 from your ISA, you could put in another £25,000 in this tax year, made up of £10,000 that’s been withdrawn, and the remaining £15,000 allowance.
Bear in mind that you can’t subscribe to more than one of the same type of ISA in a single tax year. You can only pay back in withdrawals that relate to previous years’ subscriptions to the same ISA they were taken from. However, if you withdraw the full amount of your current year’s subscription, you could then pay this into any current year ISA, but can't breach the ‘one ISA of each type per tax year’ rule.
Take a look at your Smart Investor online statement to see your current year allowance - this combines current year and flexible ISA allowance meaning that it takes account of any withdrawals that you have made from your account. You can make payments online or by phone if you’d prefer.
Please bear in mind that this article is for general information purposes only. If you’re unsure, seek professional financial advice.