Taking money out of Isa

pedro789

Hi all
I'm using £5000 of savings to buy car. Are there any tax implications from taking money out of Cash Isa? I am right in thinking it makes more sense to use Cash rather than S&S Isa? Any advice welcome.
Cheers

[Deleted User]

Once you take money out of your cash ISA, you can't generally replace it and so lose the tax free status of the money taken out. The only exception is if the ISA is a flexible ISA when you can take out part or all of the money subscribed in the current tax year and then replace the cash removed by the end of the current tax year.

As between using money from a cash ISA or realising funds in a stocks and shares ISA, it would be better to use cash funds which are achieving a very low return. However, it would be better to use non ISA cash if you have enough, rather than ISA money.

dunstonh

A lot of cash ISAs are flexible ISAs where as most S&S ISAs are not. That could have an impact depending on your future ISA allowance use.

Typically, people use S&S ISAs for their long term needs and cash for their short term needs. Mainly as cash ISAs are pretty rubbish for long term and S&S ISAs not meant for short term.

As to which you prefer, it depends on what your planning arrangements are.

xylophone

Is your ISA flexible?

http://www.moneysavingexpert.com/savings/flexible-ISAs

An example helps to explain it:

Tom has £40,000 in his cash ISA which is made up of £35,000 from previous years and £5,000 from money deposited in the current tax year, meaning he can still put £10,240 in of this year's allowance. If he withdraws £10,000 he can put in a further £20,240 in this tax year: the £10,000 he took out, plus the remaining £10,240 allowance.

pedro789

Thanks all, much appreciated.