Withdrawing from ISAs - Best way?

maturelearner

Hi!

Soon my OH and I are going to have little income coming in until I find work. We have a primary aged child. The only way to manage our outgoings will be to access my savings all of which are in ISAs.

I have two cash isa's with instant access and a S&S isa. I presume use the cash isa's first but what's the best way to access them as I've read on this site that withdrawing from an isa means you lose all tax exemption benefits, if I've understood correctly. Is there a best way to withdraw from and ISA?

Advice would be appreciated.

eskbanker

maturelearner wrote: »

I've read on this site that withdrawing from an isa means you lose all tax exemption benefits, if I've understood correctly. Is there a best way to withdraw from and ISA?

If you're withdrawing funds from an ISA then yes, they're permanently taken out of the tax sheltering whichever way you do it - the only way to keep them sheltered from tax is to transfer to another ISA so that doesn't apply here. So, it doesn't really matter how you do it.

As from July the annual contribution limit rises to £15K per person so it'll be easier to replenish your tax-free pot (when you have funds available) than it would have been in the past, so withdrawal from ISAs isn't as punitive as it used to be, especially given how poor rates are compared with other offerings in the market.

kidmugsy

maturelearner wrote: »

Hi!
I've read on this site that withdrawing from an isa means you lose all tax exemption benefits

You only lose the tax exemption benefits on the amount you withdraw, not on the money you leave behind.

We've been withdrawing lately not only for expenditure but also because we can get better interest on interest-bearing current accounts.

jimjames

maturelearner wrote: »

I have two cash isa's with instant access and a S&S isa. I presume use the cash isa's first but what's the best way to access them as I've read on this site that withdrawing from an isa means you lose all tax exemption benefits, if I've understood correctly. Is there a best way to withdraw from and ISA?

Advice would be appreciated.

If you are planning on removing money from your ISAs anyway then if you don't already have the high paying current accounts it would be worth moving the money into those to maximise your interest. If you have little income then you would presumably get interest tax free so you'd get 5% and an ISA being tax free would be pointless anyway.

So put the most you can into current accounts and leave any remainder in your ISA. As you spend the money from the current accounts top it back up again from any left in the ISA.

Leave the S&S ISA until the last possible time in case you don't need to use it at all - unless you know you need that money at a certain time.

maturelearner

Many Thanks for all the advice it is genuinely appreciated.