Do I pay tax on ISA withdrawals?

Full answer

ISA withdrawals are tax-free, and this is the core benefit of the ISA wrapper. Whatever you take out — whether interest from a Cash ISA, dividends and capital growth from a Stocks and Shares ISA, or returns from a Lifetime or Innovative Finance ISA — is free of Income Tax, Dividend Tax and Capital Gains Tax. You do not declare ISA income or gains on a Self Assessment return, which also keeps it out of calculations such as adjusted net income. The £20,000 annual ISA allowance for 2026/27 governs how much you can pay in, not how much you can take out; withdrawals are unrestricted (subject to any fixed-term Cash ISA terms set by your provider). One important nuance is the Lifetime ISA: withdrawals before age 60 for any reason other than buying a first home incur a 25% government withdrawal charge, which can leave you with less than you put in — so the tax-free rule has that one penalty exception. Another useful feature is the flexible ISA: with a flexible Cash ISA you can withdraw and replace money in the same tax year without it counting again against your allowance. Worked example: you hold £50,000 in a Stocks and Shares ISA that has grown to £70,000. Withdrawing the full £70,000 generates zero tax, even though £20,000 is a gain that would otherwise face Capital Gains Tax outside an ISA. Use the ISA calculator to project tax-free growth.

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More answers

• What is the ISA allowance for 2026/27?
• What is the Lifetime ISA bonus?