Can You Withdraw Money From An ISA And Put It Back In? – Answered

James Beattie By James Beattie 6 Min Read

Today I was running over my finances and had some extra cash I was thinking of putting into my ISA. I try to fill my ISA every year by investing £1,666 per month. I was considering adding some cash I have sitting around but there’s an off chance I might need it.

I was concerned about depositing and withdrawing the money as I thought it might wipe out my allowance for the year meaning I couldn’t make my regular deposits. However, is that actually what happens? Let’s take a look at the rules around depositing and withdrawing to an ISA.

Quick Overview
You can withdraw money from your ISA and put it back in again in the same year without losing any of your allowance. If you have deposited £15,000 in your ISA this tax year and withdraw £5,000, you will be able to add £10,000 to the account before the tax year ends.

Can I Withdraw Money From An ISA and Put It Back In?

In general, you can take money out of your ISA without losing any tax benefits. If your ISA is “flexible”, you can take the cash out, and then put it back in during the same tax year without reducing your current year’s allowance. Whether or not your ISA is flexible will depend on your provider.

There are a few key things to note:

  • The money you take out must be put back in the same tax year
  • Your ISA must be flexible

Let’s take a look at an example:

You have an allowance of £20,000 for the year and you put £12,000 in during the 2023 to 2024 tax year. You then take out £5,000.

This means that you would be able to put in £13,000 in the same Tax year. This is made up of your remaining allowance of £8,000 plus the £5,000 you took out.

If your ISA is not flexible you will only be able to put your remaining allowance of £8,000 in.

Can I Withdraw Money From A Lifetime ISA and Put It Back?

You are unable to withdraw money from a Lifetime ISA without paying a penalty. If you take out £200 you will only receive £150 as you get hit with a 25% withdrawal charge. Personally, I would avoid trying to take any money out of a Lifetime ISA unless you really need it.

An ISA (or Individual Savings Account) is simply a type of savings and investment account you can have in the UK. Think of it like a protective bubble. Anything inside this bubble (like your savings or investments) doesn’t get taxed. So, if you’ve ever had that sinking feeling of seeing taxes diminish your hard-earned returns, an ISA is your tax-free sanctuary.

But why should you consider having one? Here are the perks:

  1. Tax-Free Growth: The main benefit, and probably the biggest attraction, is that any money you make from investments or interest is completely tax-free.
  2. Flexibility: There’s a range of ISA types, including cash ISAs where your money is kept just like in a regular savings account, suiting different needs and risk appetites.
  3. A Safety Net: Since they’re designed to protect your money, ISAs can act as a financial cushion, ensuring that your savings remain untouched by taxes.

In a nutshell, ISAs are an invaluable tool in your financial toolkit, offering a tax-efficient way to save or invest. However, always consider your own financial circumstances and maybe chat with a financial advisor to see if an ISA aligns with your goals.

Personally, I plan to max out my ISA every year until retirement allowing me to take large monthly dividend payments without having to pay any tax on the income.

If you’re considering getting an ISA, you may be interested in checking out our article on how to become an ISA Millionaire.

Final Thoughts

I was pleasantly surprised that I was allowed to withdraw money and put it back within the same tax year. It gives you a little flexibility to access money in your ISA if you really need it. I still wouldn’t make it a habit, dipping in and out of your ISA account. It should really be for true emergencies only.

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I'm passionate about personal finance and making money. Currently trying to FIRE solely by building online assets. Grew my stock portfolio to £86,000 by 26.
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