Flexible ISA accounts are not a separate ISA product.
At the ISA provider’s choice, Cash or Stocks and Shares ISAs can be flexible or not.
Flexible ISA accounts (be it cash or stock and shares) allows the investor to withdraw funds from the ISA account and replace that money, wholly or partially, within the same tax year. This does not affect their yearly £ 20,000.00 ISA allowance, which is completely separate.
EXAMPLE
An investor holds a cash ISA with £ 50,000.00 within it. On the 15th June 2018 he withdraws £ 40,000.00. Before the end of the tax year (6th April 2019), he has the option to replace the £ 40,000.00 or any amount less back into the same ISA account. In addition, he can also subscribe his yearly £ 20,000.00 into that same ISA account, or any other ISA account he may hold.
If the investor withdraws funds from a flexible ISA but does not replace those funds by the end of the tax year, then the option to replace those funds is lost.
Note, you can only replace withdrawn funds into the same ISA account they were withdrawn from.
EXAMPLE
An investor holds a cash ISA with ISA provider A and a stocks and shares ISA with provider B. On 10th July 2018 he withdraws £ 75,000.00 from his cash ISA with provider A. By the end of the tax year, he can only replace £ 75,000.00 or less back into his cash ISA, but not into his stocks and shares ISA with provider B.
Transferring Flexible ISA accounts to another provider
If the investor holds an ISA account with one provider and transfers that ISA account to a new provider, then he should replace any withdrawn funds with the old provider, before the transfer takes place, as he loses the option to do so once the transfer has been completed and the old account is closed.
NOTE: in the above example, current year subscriptions can still be replaced with the new provider. As the old provider with report to the new provider, the investor’s current year subscriptions as – current subscriptions minus withdrawals.
EXAMPLE
An investor subscribes £ 20,000.00 in his stocks and shares ISA with provider A (thus using up with full yearly ISA allowance), then later within the same tax year withdraws £ 60,000.00 from that same ISA account. He then transfers this ISA account to another stocks and shares ISA with provider B.
Provider A will report to provider B that the investor’s current year subscriptions as zero (£ 20,000.00 minus £ 60,000.00). Therefore, the investor is free to subscribe £ 20,000.00 into this new ISA account with provider B but loses the option to replace the remaining £ 40,000.00.
Clearly, flexible ISA’s are useful for investors whom may need funds for emergencies or short term investment opportunities, and still giving them the option to put those funds back into the ISA tax wrapper before the end of the tax year.
Be aware that not all providers offer flexible cash or stocks and shares ISAs. If this is something of interest to you, then you should ask your ISA provider if their ISAs are flexible before considering opening an account with them.
If I’ve not made anything clear, please leave a comment and I’ll do my best to answer it.