Question about ISA

frank92

Hello,

I've been trying to understand how an ISA (Individual Savings Account) works. Let me picture an example to see if I've got it.

Let's imagine that I earn £30k before taxes. Then, I put £22k into my ISA and don't pay any taxes as my "income" is under the threshold of personal allowance. Would this hypothetical situation be possible?

My question is: let's say that one day I have £40k in my ISA. Then I want to withdraw £4k. Would this £4k count as income? I mean, would I have to pay taxes for the money I've withdrawn?

Thanks in advance!:j

Reed_Richards

You are confusing an ISA with a pension. If you earn £30k you will have to pay tax on all of this except for anything you put into a pension. But any money withdrawn from an ISA is not taxed as income whereas regular payments from a pension are taxed as income (you can also take a tax-free lump sum from a pension but let's not complicate things).

AnotherJoe

Yep, what RR says, you appear to have completely misunderstood what ISAs are and how they work, and possibly are confusing them with pensions.

ISAs have zero effect upon your tax position re salary etc.


An ISA works by , you put money in it (a maximum of £20k a year) , you can invest that money or have it in a savings type account with a low % of interest, and then you can take that money out. All without any tax implications going in or coming out.

frank92

ok, now I get it. I seemed too good to be true. ::rotfl: