withdrawing from an ISA

STAR1Y

Hi, Im hoping to retire late next year (at 60) . I plan to put money in Isa's but I would like to know if i would pay tax on any regular funds I withdraw and put in my bank account

masonic

No, cash and S&S ISAs don't provide any tax relief on the way in, just tax exemption on income and capital gains within, so when you take the money out again it is treated just like withdrawing from a standard account.

MeteredOut

No tax payable. ISAs withdrawals are tax free - this includes all deposits and any interest earned inside the ISA. That's the whole purpose of them.

Yorkie1

Just bear in mind that if you use the money to invest in S&S ISAs, you won't be able to transfer cash to a cash ISA until the tax year when you become 65. You can sell the ISA funds and withdraw the cash, but not transfer it to the ISA.

And you will be limited to £12K deposit in the cash ISA until the same point too. (Max £20K overall, but only £12K in the cash).

masonic

The final form of the new rules is not yet known, but it seems use of a money market fund in combination with some level of other investments would avoid the need to move from investments to a cash ISA.

If retirement provisions are all pension-wrapped already, then use of a S&S ISA may not be needed anyway, and the £12k per tax year cash ISA limit may be enough for cash flow purposes, while holding some low risk investments in the pension account.

Whereas if there are plans to hold funds in the ISA that won't be needed until late retirement, cash would be an unwise vehicle for these.

nottsphil

Make sure it's a flexible ISA if the total deposits are likely to hit the 12,000 pound limit.