Cash ISA

helgawb

I am so confused about ISA allowances.
If I have a non-flexible ISA, with the maximum amount in it, £20,000, and it is earning interest,  so the amount in the ISA increases each month, can I withdraw the interest each month, and the original £20,000 allowance remains untouched? Because this doesn't seem to be the case

I.e on 6th April I opened a new ISA and deposited £20,000.

On 5th May the interest accrued of £74.57 made the balance £20,074.57.
However if I withdraw this interest does it reduce my allowance or just come from the excess over £20,000.

Peter999_2

The interest that you have earnt remains tax free as long as you keep it in the ISA.   If you withdraw the interest then you still have the £20,000 invested tax free.     The rules are purely that you can only put in the £20,000 a year into a cash ISA.

I know people who have ISAs that started at £20,000 and they are over £30,000 now.   The never take the interest out, just let it add to the tax free ISA ever year.     

RetiredTaz

I believe you would need to have set your interest to be paid into your non ISA account when opening the account. It all depends on the terms of the ISA you opened, you can’t just withdraw the interest now. Withdrawing the interest is generally best kept within your ISA so that it compounds, and it will still be shielded from the tax man (or woman) 😁

HappyHarry

There is not a maximum amount that can be held in an ISA. Many people have hundreds of thousands of pounds in ISAs.

There is a maximum amount that can be contributed to ISAs in any tax year - currently £20,000.

Withdrawing from a flexible ISA means that you can add your withdrawal back to the same ISA each year and still contribute an additional £20,000.

Withdrawing from a non-flexible ISA means that you can still only contribute £20,000 to an ISA.

Mark_d

Your 20k allowance, for the period 6/4/25 to 5/4/26 has already been used.  You cannot withdraw and refill your ISA as it's non-flexible.  You allowance for this financial year does not change regardless of how much you withdraw.

Kim_13

If you have a non-flexible ISA it must be either an Easy Access where the provider has chosen not to offer Flexible ISAs, or a Fixed Rate ISA. If it is Easy Access, you can withdraw the interest without penalty each time it is credited to the account, but would not be able to pay any of it back in later (as you have no allowance to do so.) If you leave the interest where it is, any interest earned by the interest would also be tax free.

If it is a Fixed Rate ISA, you would only be able to withdraw the interest upon payment of a penalty, if paid to the ISA was either selected or the default when you opened it (not all providers offer paid away.) It isn’t worth paying a penalty to get at the interest unless the situation is dire. Some providers will allow a partial withdrawal, so you can take only what you need, while others force you to close the whole ISA so you lose the tax free status on the whole £20,000+. 

Matty246

I may be wrong or telling you something you already know but if you withdraw the the interest every month get as much on maturity as it won't compound.