Spend Savings from Cash ISA or Savings Account?

thebutterflycollector123

I have just moved house and am having to spend some of my savings to buy furniture etc (approximately £2,000 required to spend) but my savings are spread between a Cash ISA and a higher-interest savings account. I am trying to work out what is the more economical way of spending these savings (ie. which account to remove £2k from).

£12,370 worth of savings TOTAL broken down as below:

£10,040 in Cash ISA (3.75% AER/3.69% tax-free (variable) - underlying rate (tax-free) 3.19%, bonus rate (tax free) 0.49%)

£2,330 in Savings Account (£1 - £5,000 - 5.37% Gross, 5.50% AER) - I put the max limit of £150 into this account every month to make the most of the higher interest rate.

I'm just looking for some advice because I am useless at understanding this - one obviously has the ISA tax benefits and the other is a higher interest rate.

Any thoughts would be much appreciated!

surreysaver

Do you pay tax, and if so, at what rate? This will determine which account it would be better to remove money from.
Also, do you intend to replenish the money, and is the ISA flexible?

Kim_13

Take it from the ISA. With these figures the £2,000 can be replaced even if the ISA is not Flexible, as the annual ISA allowance is in excess of the money you have available. 

If you were to take it from your NatWest/RBS Digital Regular Saver it would take over a year to put it back. A full DRS generates £275 interest a year, so you would pay no tax on this unless you were an Additional Rate taxpayer due to the savings allowances available.

thebutterflycollector123

@surreysaver

Thanks for your response.

The Cash ISA is not flexible. I do intend to replenish the money gradually to the tune of about £250 per month (but probably not until the turn of the year) in addition to the £150 I'm putting into my savings account regularly.

Yes I pay tax - my monthly taxable income is £3,757.75 and I pay at Scottish tax rates, so I pay about £580 in tax per month.

£0-12,570 - 0%
£12,571 - £15,397 - 19% (£44.75 p/m)
£15,398 - £27,491 - 20% (£201.55 p/m)
£27,492 - £43,662 - 21% (£282.98 p/m)
£43,663 - £75,000 - 42% (£50.05 p/m)

jimjames

Definitely from the ISA then. Plenty of scope to pay it back in if needed even though it's not flexible

Kim_13

thebutterflycollector123 said:

@surreysaver

Thanks for your response.

The Cash ISA is not flexible. I do intend to replenish the money gradually to the tune of about £250 per month (but probably not until the turn of the year) in addition to the £150 I'm putting into my savings account regularly.

Yes I pay tax - my monthly taxable income is £3,757.75 and I pay at Scottish tax rates, so I pay about £580 in tax per month.

£0-12,570 - 0%
£12,571 - £15,397 - 19% (£44.75 p/m)
£15,398 - £27,491 - 20% (£201.55 p/m)
£27,492 - £43,662 - 21% (£282.98 p/m)
£43,663 - £75,000 - 42% (£50.05 p/m)

If you wanted to get a Flexible ISA allowance rather than using 2025/26 allowance to replace the money, you could do this by transferring the ISA to a Flexible provider before doing the withdrawal (if the rate is lower from the Flexible provider you could do a partial transfer of the £2,000 only.)

Yorkie1

Kim_13 said:

thebutterflycollector123 said:

@surreysaver

Thanks for your response.

The Cash ISA is not flexible. I do intend to replenish the money gradually to the tune of about £250 per month (but probably not until the turn of the year) in addition to the £150 I'm putting into my savings account regularly.

Yes I pay tax - my monthly taxable income is £3,757.75 and I pay at Scottish tax rates, so I pay about £580 in tax per month.

£0-12,570 - 0%
£12,571 - £15,397 - 19% (£44.75 p/m)
£15,398 - £27,491 - 20% (£201.55 p/m)
£27,492 - £43,662 - 21% (£282.98 p/m)
£43,663 - £75,000 - 42% (£50.05 p/m)

If you wanted to get a Flexible ISA allowance rather than using 2025/26 allowance to replace the money, you could do this by transferring the ISA to a Flexible provider before doing the withdrawal (if the rate is lower from the Flexible provider you could do a partial transfer of the £2,000 only.)

I have a feeling that partial transfer is not possible for funds deposited this tax year, but is possible for any funds deposited in previous tax years. The OP would need to check their circumstances.

Ch1ll1Phlakes

Yorkie1 said:

Kim_13 said:

thebutterflycollector123 said:

@surreysaver

Thanks for your response.

The Cash ISA is not flexible. I do intend to replenish the money gradually to the tune of about £250 per month (but probably not until the turn of the year) in addition to the £150 I'm putting into my savings account regularly.

Yes I pay tax - my monthly taxable income is £3,757.75 and I pay at Scottish tax rates, so I pay about £580 in tax per month.

£0-12,570 - 0%
£12,571 - £15,397 - 19% (£44.75 p/m)
£15,398 - £27,491 - 20% (£201.55 p/m)
£27,492 - £43,662 - 21% (£282.98 p/m)
£43,663 - £75,000 - 42% (£50.05 p/m)

If you wanted to get a Flexible ISA allowance rather than using 2025/26 allowance to replace the money, you could do this by transferring the ISA to a Flexible provider before doing the withdrawal (if the rate is lower from the Flexible provider you could do a partial transfer of the £2,000 only.)

I have a feeling that partial transfer is not possible for funds deposited this tax year, but is possible for any funds deposited in previous tax years. The OP would need to check their circumstances.

Partial transfers can be any tax-year, current or previous, but subject to provider T&Cs

PixelPound

Kim_13 said:

thebutterflycollector123 said:

@surreysaver

Thanks for your response.

The Cash ISA is not flexible. I do intend to replenish the money gradually to the tune of about £250 per month (but probably not until the turn of the year) in addition to the £150 I'm putting into my savings account regularly.

Yes I pay tax - my monthly taxable income is £3,757.75 and I pay at Scottish tax rates, so I pay about £580 in tax per month.

£0-12,570 - 0%
£12,571 - £15,397 - 19% (£44.75 p/m)
£15,398 - £27,491 - 20% (£201.55 p/m)
£27,492 - £43,662 - 21% (£282.98 p/m)
£43,663 - £75,000 - 42% (£50.05 p/m)

If you wanted to get a Flexible ISA allowance rather than using 2025/26 allowance to replace the money, you could do this by transferring the ISA to a Flexible provider before doing the withdrawal (if the rate is lower from the Flexible provider you could do a partial transfer of the £2,000 only.)

Flexible or not is a moot point if they are not going anywhere near the £20k this tax year.