We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.

Withdrawing cash from ISA.

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

Comments

  • Doctor_Who
    Doctor_Who Posts: 917 Forumite
    Part of the Furniture 500 Posts Name Dropper Photogenic
    edited 10 August 2023 pm31 1:41PM
    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.
    'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it' - Albert Einstein.
  • 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
    eskbanker Posts: 35,388 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 10 August 2023 pm31 4:30PM
    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!
  • 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?
    'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it' - Albert Einstein.
  • 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
    eskbanker Posts: 35,388 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    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).
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.4K Banking & Borrowing
  • 252.2K Reduce Debt & Boost Income
  • 452.5K Spending & Discounts
  • 241K Work, Benefits & Business
  • 617.4K Mortgages, Homes & Bills
  • 175.7K Life & Family
  • 254.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.