Withdrawing cash from ISA.

Marchmartian

I am thinking of withdrawing cash from my ISA. Would it be better to surrender or withdraw most of the money?
Also if I take £15,000 out of it does it go against your personal allowance? I am getting conflicting answers from my ISA provider and independent advisors.

Thanks

Doctor_Who

Marchmartian said:

I am thinking of withdrawing cash from my ISA. Would it be better to surrender or withdraw most of the money?
Also if I take £15,000 out of it does it go against your personal allowance? I am getting conflicting answers from my ISA provider and independent advisors.

Thanks

Are you withdrawing the money to spend it? If you want to put it in another ISA then don't withdraw it but do an ISA transfer instead, otherwise the money will lose its ISA status.

The ISA money is not earned or pension income, therefore it does not go against the personal allowance. Any interest earned in an ISA is tax free.

Edit: do you mean personal savings allowance? If so, ISA interest is tax free and does not count towards the personal savings allowance.

Marchmartian

I think they are just trying to get out of transfering the money by saying that my wages, plus the £15000 will put me over £50000 (higher tax band I guess) so I will be liable to pay tax on the £15000. Would it be easier to not close the ISA and leave some money in it?

eskbanker

Marchmartian said:

I think they are just trying to get out of transfering the money by saying that my wages, plus the £15000 will put me over £50000 (higher tax band I guess) so I will be liable to pay tax on the £15000. Would it be easier to not close the ISA and leave some money in it?

You and/or whoever you're talking to is misunderstanding the situation - withdrawing money from an ISA isn't income, so isn't added to actual income to produce some sort of tax liability.

What are you actually trying to achieve?  If you want to access money from your ISA to spend, or to save elsewhere, then go ahead, there's no need to overthink it and come up with complications arising from misunderstandings!

Doctor_Who

Marchmartian said:

I think they are just trying to get out of transfering the money by saying that my wages, plus the £15000 will put me over £50000 (higher tax band I guess) so I will be liable to pay tax on the £15000. Would it be easier to not close the ISA and leave some money in it?

The £15K is ISA savings, not earned income, so it is not added to your earned income when calculating tax. You can do what you like with your ISA savings - withdraw them and spend the money or transfer them to an ISA paying a better rate and it will not affect your income tax for the current tax year. Closing the ISA or leaving some money in there makes no difference. Who is telling you this information?

Marchmartian

The company I have the ISA with. Thank you for the input that has made it very clear that they are trying to scare me into keeping the account. Again thank you.

eskbanker

Marchmartian said:

The company I have the ISA with. Thank you for the input that has made it very clear that they are trying to scare me into keeping the account. Again thank you.

I imagine that the message they're trying to convey is that removing money from the ISA wrapper loses its tax-free status, so anything you subsequently earn from that (such as interest) would be taxable income.

In other words, if you withdraw £15K from your ISA to your non-ISA account, there's no tax to pay on that £15K as such, but if, for the sake of argument, you earned £750 interest at 5% on that pot over the next year, then that £750 would be taxable income (albeit still unlikely to result in any tax being payable as it would be covered by your personal savings allowance, unless that was already spoken for with other savings).