ISA vs Fixed Rate Bond

It mainly depends on whether you would prefer to keep the tax protection or receive a higher amount of interest.

If you don't pay tax on the interest income and can get a better gross interest rate in a fixed rate bond than you can get in an ISA (and don't mind a fixed term fixed rate product) then on the face of it you would get a better return by not using an ISA.

A couple of things to note are

- the amount you are proposing to take out of the ISA is greater than you could put back into an ISA in a single tax year, so if your circumstances change you might eventually have preferred to keep it in an ISA product. Not an issue for people who don't have much in the way of new savings becoming available to use up their annual ISA allowances and are only on basic rate tax.

- if you put the money in a fixed rate bond and then decide you want or need to access it before the term is up, the product may not actually let you have your money back (even with a penalty) until the term expires. It depends on the terms and conditions. Whereas with an ISA, the money is always accessible at relatively short notice in an emergency because ISA providers are required to let you transfer out to another ISA manager's product if you wish, so you could transfer to an instant access product and get your hands on the money, if you needed it.