Paying tax on an ISA?

[Pythia]

I know that ISAs are a way to save tax-free, but don't you incur tax charges if you withdraw it? Various websites I've looked at seem to imply that. In which case, if you have to pay tax on it eventually, what's the point? You can't use it, you're just putting it somewhere where you daren't touch it because you'll lose the tax benefits.
I don't understand.

[LoftyLottie]

I don't think you incur tax if you withdraw it? I never have.

[DocHH]

There are 2 types of ISA, cash and stock/shares. In the first instance you do not pay tax on any interest/income which you withdraw. Hence Lofty Lottie is correct in stating she has not incurred tax on withdrawing interst from an ISA.

In the second type, if you are a basic rate taxpayer you will only benefit from not paying any Capital Gains Tax, if you are a higher rate tax payer you will not have to pay the difference between the ACT (Advance Corporation Tax) on the divdends and the higher rate of tax, and also benefit from not paying Capital Gains Tax. I have tried to keep this as simple as possible, and if it does not fully explain the situation, I apologise.

[boxtops]

I have a cash ISA and I can withdraw at will, I only pay tax if I transfer to another account, the tax is on the other account. The interest from the ISA is tax free.

[Pythia]

Still confused, as MoneySavingExpert.com (who are usually spot-on) say

"Transferring an ISA allowance is a technical process, not just like switching a normal savings account. Yet as long as you abide by the golden ISA transfers rule, it should go smoothly.

"Never, ever, ever, ever withdraw money from a cash ISA!
You'll immediately lose all the tax benefits."

Instead speak to the new provider and fill out a transfer form. This will usually include a note you can send to your existing ISA company. Your new company should then sort it all out, including moving the money over for you, keeping your tax benefits intact. "

So if after a while I want to (for example) take all my ISA money out to put towards a new house, I WON'T lose out? (I'm only talking about cash ISAs here.)

Thanks for your answers so far, folks

[dzug2]

When you take money out of a cash ISA or cash in a S&S ISA what you lose is FUTURE taxation benefits. FUTURE interest ceases to be tax free, FUTURE gains cease to be CGT free. What you have already remains tax free.

[factor-fiction]

If you put in ypur full annual allowance on 10 April and then withdraw it shortly afterwards you cannot then replace it in your tax-free ISA in the same tax year. That's what they mean by losing tax-free status

[237SJ]

I think they are implying that if you withdraw money yourself and put it into another ISA (for example) you lose it`s tax free status. You have to get your ISA provider to do it directly with the new provider.

[Pythia]

Thank you. The penny drops, the lightbulb goes TING.
Cheers all