ISA Help Please

[anonymous-user]

I want to take a bit of money out of my cash ISA (not a fixed term), I have unlimited withdrawals and there are no penalties, except it says: "Any funds withdrawn from a Cash ISA will lose their tax-free status."

I understand that interest earned in an ISA is not taxed, but I don't understand how this affects money that I take out of the account. Am I going to be charged some horrible amount to do this?

It's the first time I've had an ISA as you can probably tell.

ETA: I'm transferring to a current account with a different bank if that makes a difference.

Thanks in advance.

Edited by MSTRBKR on Monday 4th June 22:09

[anonymous-user]

It simply means that once you take the money out of the ISA (say if you move it into a standard saving account) then any interest you earn on it will be taxable.

[anonymous-user]

Thanks for the reply. So basically it is no penalty at all, because the interest I earn in my current account is literally pennies and I'm going to be spending this anyway. Also the interest I've already earned in my ISA remains intact I presume?

[Teocali]

MSTRBKR said:

Thanks for the reply. So basically it is no penalty at all, because the interest I earn in my current account is literally pennies and I'm going to be spending this anyway. Also the interest I've already earned in my ISA remains intact I presume?

Depends on whether the interest is paid annually, monthly, or as a one off bonus. But you won't (usually) be charged to withdraw and would simply miss out on the interest you can earn on your tax free amount for the year.

Also if you transfered £5,640 into an ISA in May and withdrew in June you cant refill your ISA until the next tax year, even if you account never goes over the maximum limit.

[anonymous-user]

Teocali said:

Depends on whether the interest is paid annually, monthly, or as a one off bonus. But you won't (usually) be charged to withdraw and would simply miss out on the interest you can earn on your tax free amount for the year.

Also if you transfered £5,640 into an ISA in May and withdrew in June you cant refill your ISA until the next tax year, even if you account never goes over the maximum limit.

My interest is paid anually in March so if I withdraw I will lose a bit of interest as I will hit the limit before the end of April 2013. There is no charge, but this tax thing was woefully unclear to me so I thought I better check.

I basically put too much money in this month, forgetting about a couple of things. It will be better in that case to use my credit card (which is always paid off the following money by DD) for these purchases so I can keep the money in the ISA.