Are ISA withdrawals taxed?
Answered 17 March 2026
No, ISA withdrawals are not taxed. Here is a full explanation:
What the law says
Under TCGA 1992 s.151, the Treasury may make regulations providing that an individual who invests under a plan (including an ISA) shall be entitled to relief from capital gains tax in respect of those investments. The corresponding income tax exemption framework is provided by Chapter 3 of Part 6 of ITTOIA 2005, under which the ISA Regulations (SI 1870/1998) were made.
Provided certain conditions are satisfied, qualifying investments held in an ISA are exempt from both Income Tax and Capital Gains Tax.
HMRC guidance / practice
HMRC confirms the practical effect clearly:
"Investors pay no tax on any of the income they receive from their ISA savings and investments. They do not have to declare income and capital gains from ISA savings and investments or even tell their HMRC office that they have an ISA."
This means that when you withdraw from an ISA — whether it is interest, dividends, or capital gains — no tax is due and no reporting is required.
Additionally, where a life insurance policy is held within a valid ISA, even chargeable event gains (which would normally be taxable) are exempt from tax under the ISA Regulations.
Dividends received on shares held in an ISA are also specifically excluded from the dividend allowance calculation, confirming they are entirely tax-free.
⚠️ One exception to note
The tax exemption does not apply if the ISA becomes void (e.g. due to a breach of the ISA rules). In that case, the exemption is removed for termination events and excess events arising from the voiding.
Citation sources
Part IV Shares, securities, options etc. Chapter III Miscellaneous provisions relating to commodities, futures, options and other securities Personal equity plans. 151 1 The Treasury may make regulations providing that an individual who invests under a plan shall be entitled to relief from capital gains tax in respect of the investments. 2 The provisions of Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans), except sections 694(1) to (2) and 694A(1) , shall apply in rel
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