Isa cash withdrawal

lazchris

I have a problem getting my head round the isa rules. Can you help?
If I open a 'new' isa this year, say with £1000 and keep my 'old' isa open. Can I draw cash out of my 'old' isa without affecting how much allowance I can put into the 'new' isa?

evenasus

lazchris wrote: »

I have a problem getting my head round the isa rules. Can you help?
If I open a 'new' isa this year, say with £1000 and keep my 'old' isa open. Can I draw cash out of my 'old' isa without affecting how much allowance I can put into the 'new' isa?

Yes you can.

It will not affect this years allowance.

You ought to check what rate your old ISA is right now. The rate often drops after the first year.

In which case, you can open a new ISA, transfer your old one to it and then be able to add up to £5640 this year.

psychic_teabag

You can also withdraw from your new ISA without affecting your allowance : the allowance measures the money going in, and doesn't notice whether it goes out again.

People on here say that withdrawing from your ISA wastes your allowance, but that's really a shorthand. Depositing into your ISA consumes your allowance, and whatever you do subsequently, it's gone. Whether you withdraw from this year's ISA or last years, you are reducing the maximum you can have in ISAs at the end of the tax year (by the same amount).

Actually, that's not 100% true. Withdrawing from this year's is better, since there is one (rather extreme) process you can follow to restore this year's balance (at the expense of your S&S ISA allowance), but money you take out from last year's ISA can never be replaced.

lazchris

evenasus wrote: »

Yes you can.

It will not affect this years allowance.

You ought to check what rate your old ISA is right now. The rate often drops after the first year.

In which case, you can open a new ISA, transfer your old one to it and then be able to add up to £5640 this year.

Hope I've got this message right. Thanks for your info. Can you advise regarding what happens if I just add new cash to the old isa and then want to withdraw some cash. Will this then affect the amount I can save.?

thenudeone

As long as the ISA is an instant access ISA you can always withdraw all of it regardless of any deposits or transfers.

psychic_teabag

The only thing that affects how much more you can save is how much you have already saved since April 6th. Withdrawals have no impact whatsoever.

If you do reuse an ISA from one year to next, I'm not quite sure whether, when you withdraw, it comes from current year's subscription or previous money first. It doesn't make any difference to how much more you can save, but it can make a difference if you want to do a partial transfer, since all the new money must stay together (and therefore it matters how much new money there is). I'm sure the rules define whether it's new money or old money that's considered to be withdrawn first, but I don't happen to know which it is.

I tend to open a new ISA each year rather than reusing old ones.