If you have set up an Individual Savings Account (ISA), and you find yourself needing to take money out of it, you might have some questions about the process.
For optimal financial planning, it’s important to understand how to get money out of an ISA, and have a good grasp on ISA withdrawal penalties, so you can project how this will affect your overall savings.
We’ve put together a top-level guide to ISA withdrawals, covering various types of ISAs and the rules linked to them.
ISAs can have their balances withdrawn from any time. Some providers will have their own rules around this though, so it’s worth double checking the terms of your account before doing so.
One of the main rules which applies to all types of ISAs (except for a lifetime ISA) is the yearly ISA allowance. As of 2024/25, this allowance is £20,000, which means that individuals can’t put more than £20,000 into their ISAs per year. All deposits made into an ISA count towards this, even if you withdraw them. So, if you were to deposit £12,000 and then withdraw £2,000, you would have £10,000 left in your ISA, with a total of £8,000 left in your allowance.
However, if your ISA is flexible, such as a Single Access or Double Access Cash ISA, your allowance would be £10,000, which is the amount left in the allowance + the £2,000 you withdrew previously.
Make sure you check with your provider to see if the accounts they provide are flexible in this regard.
Although they may sound similar, withdrawing and transferring from/to an ISA are two very different things.
Transferring an ISA can allow you to retain the tax-free benefit of the funds, whereas withdrawing from an ISA and then putting those withdrawn funds into a different one can reduce your ISA allowance.
Read more: How to transfer an ISA: ISA transfers, explained
ISA withdrawal charges and penalties depend greatly on the type of ISA you hold. For example, if you have an easy access cash ISA account, your ISA withdrawal penalties would be significantly lower than other types, and sometimes non-existent.
On the flip side, fixed rate or limited access cash ISAs can have rules on withdrawals, such as limiting the number of times you can withdraw annually without affecting your preferential interest rate (as is the case with our single access and double access reward ISAs). Following that, you would still be able to withdraw cash, but your rate will drop.
Withdrawing from a stocks and shares ISA, meanwhile, is linked to additional steps, such as selling off some of your assets. This means the process normally takes at least a few days, which is less than ideal if you need the funds sooner rather than later. Not to mention stock value tends to fluctuate, so you might be selling at a loss.
Lifetime ISA penalties are perhaps the most severe; since this type of account is normally set up with various restrictions on the intended use of the money (traditionally either first-time buyer or retirement support), taking cash out for other purposes can land you with a hefty charge.
Whatever your ISA account type, it’s always worth going over the terms and conditions before taking action; after all, every lender can have a unique set of ISA withdrawal penalties, depending on the contract you signed.
Some ISA accounts, like our new reward ISAs, will have a degree of flexibility built into them, allowing you to withdraw cash once or twice a year (for single access or double access cash ISAs, respectively) without affecting your interest rate.
However, not all ISA accounts will have that feature, or they might include a trade-off, such as reduced interest, or even an early ISA withdrawal charge. Make sure you know your provider’s individual rules, so you can make informed decisions about your finances.
You can learn more about our limited access reward ISAs here: The benefits of Reward ISAs
Now that you have a clear idea what the ISA rules on withdrawals are for your account, take stock on whether it’s totally imperative that you take money out. If losing the interest rate boost, or worse – incurring additional charges – would counteract the benefits of opening an ISA, you might want to think about alternative funding.
Is it possible to make adjustments in your monthly budget, for example? What about dipping into other savings accounts, which potentially have more forgiving terms and conditions on withdrawals? Dipping into your ISA should be at the bottom of your list – after all, the whole point of setting up an account is to let the benefits compound long-term.
If you decide that taking cash out of your ISA is worth the withdrawal penalties, the first step to getting the ball rolling is reaching out to your provider, via online banking or by calling the customer support team.
Double-check that you have all the necessary details on hand, including the withdrawal sum, and where the money will be going. This is also a good opportunity to check once more on the exact ISA withdrawal charges, rules, and other potential penalties. After all, small print or recent updates to terms and conditions can be easy to miss, especially when you’re already under financial pressure.
Once you’ve given the green light on the money leaving your account, all that’s left to do is wait. If you have a cash ISA, the funds might be released relatively quickly, but selling investments from a stocks and shares ISA might take a while longer.
Having a solid understanding of ISA rules on withdrawals empowers you to better manage your savings. And, with a limited access account like our reward ISAs, you can plan one or two annual withdrawals without affecting your preferential interest rate.
Our new single and double limited access ISA offerings are designed to give you some flexibility, combining higher interest rates with the chance to access some of your funds without a penalty. This way, you can optimise returns on the funds you’ve invested, without cutting yourself completely from such a big sum of money for the long haul.
Explore all of our cash ISA accounts today and start making your savings work harder for you!