ISA Withdrawal Loss Calculator
The ISA annual allowance is a one-time tax-free opportunity. When you withdraw money from your ISA, you permanently lose the tax-free growth potential on that amount. This calculator shows how much you lose long-term.
What You're Losing
Enter your details above to see your lost growth potential.
Remember: The £20,000 annual ISA allowance is a single-use opportunity. Withdrawn money can't be replaced tax-free. Your £15,000 withdrawal could cost you £20,000+ in future growth (as shown in the Sydney teacher example).
Most people hear "ISA" and think tax-free savings. And sure, that’s the big sell. But if you’re planning your money around an ISA like it’s a magic money box, you’re missing the real picture. The truth? ISAs have serious downsides that can cost you more than they save - especially if you don’t know what you’re getting into.
You Can’t Just Take All Your Money Out Whenever You Want
A lot of people think ISAs are like regular savings accounts. You put money in, you pull it out, easy. Not true. If you’ve got a Cash ISA, you might be fine - most let you withdraw without penalty. But if you’ve got a Stocks and Shares ISA, things get messy. Some providers lock your money in for a year. Others charge fees if you sell investments mid-year. And if you’ve invested in property funds or private equity through your ISA? Good luck getting cash out fast. One investor in London sold shares in a biotech fund in March 2024 and had to wait 14 days just to get the money into their bank. That’s not flexibility - that’s a trap if you need cash in a hurry.The Annual Allowance Is Too Small for Real Growth
In 2025, the ISA allowance is £20,000. Sounds generous, right? Until you realize that’s it. No carryover. If you don’t use it by April 5, it’s gone. And if you’re trying to build serious wealth, £20,000 a year isn’t enough. Let’s say you’re 35, earning £50,000, and you want to retire at 60. Even if you max out your ISA every year and get a steady 6% return, you’ll end up with just over £900,000 after 25 years. That’s great - but not enough to live comfortably in London or Sydney if you’re used to a middle-class lifestyle. Meanwhile, your pension can take £60,000 a year in contributions (with tax relief), and your workplace pension might add another £10,000 from your employer. ISAs don’t match that. They’re a supplement, not a solution.There’s No Protection Against Market Drops
The Financial Services Compensation Scheme (FSCS) protects up to £85,000 in cash held in a bank or building society. But that only applies to Cash ISAs. If you’ve got a Stocks and Shares ISA, you’re exposed to market risk - and there’s no safety net. In 2022, the FTSE 100 dropped 12% in a single year. Investors who panicked and pulled out of their ISAs lost money they never got back. The FSCS doesn’t cover investment losses. It only protects you if the provider goes bust. That’s a big difference. You’re not protected from bad markets - only bad companies. And if you’re relying on your ISA for retirement income, a market crash could force you to sell low, right when you need cash the most.You Can’t Reuse the Tax-Free Allowance After Withdrawals
This one trips up even smart people. If you take £10,000 out of your ISA in June, you can’t put it back in later and get the tax-free benefit again. The £20,000 allowance is a one-time use per year. So if you withdraw £10,000 to pay for a car or medical bill, you’ve permanently lost the chance to shelter that £10,000 from tax for the rest of your life. That’s not a feature - it’s a flaw. One Sydney-based teacher withdrew £15,000 from her ISA to cover her daughter’s university fees. She didn’t realize she’d lost the tax-free growth on that money forever. By the time she tried to replace it, the allowance had reset - and she was stuck with a £15,000 gap in her long-term savings.
It’s Easy to Overlook Hidden Fees
ISAs sound free. But they’re not. Many providers charge platform fees, fund management fees, or trading commissions. A £20,000 ISA with a 0.4% annual platform fee costs you £80 a year. That might not seem like much - until you compound it over 20 years. At 5% growth, that £80 a year adds up to over £2,800 in lost returns. Some providers also charge exit fees if you switch platforms. And if you’re buying ETFs or individual stocks inside your ISA? You might pay £5-£10 per trade. That’s fine if you’re investing once a year. But if you’re dollar-cost averaging monthly? You’re paying £60-£120 a year in trading fees alone. That’s money you could’ve kept.You Can’t Combine ISAs From Different Providers Easily
You can have multiple ISAs - but you can’t merge them. If you opened a Cash ISA with Bank A in 2020, a Stocks and Shares ISA with Broker B in 2022, and a Lifetime ISA with Provider C in 2023, you’ve got three separate accounts. Each with its own login, its own statements, its own fees. And if you want to move money between them? You can’t just transfer the cash. You have to do a formal ISA transfer - which can take weeks. And if you accidentally withdraw and re-deposit? You risk blowing your annual allowance. One man in Manchester tried to consolidate his ISAs in 2024 and accidentally withdrew £5,000 instead of transferring it. He lost the tax-free status on that money and had to pay £1,200 in extra tax.It Doesn’t Help If You’re Not a Higher Rate Taxpayer
The real power of an ISA comes when you’re paying 40% or 45% income tax. If you’re a basic rate taxpayer (20%), the benefit is smaller. You already get tax relief on pension contributions - so your ISA might just be doubling up. For someone earning £35,000, the tax saving on £20,000 in ISA growth is £4,000 over 20 years. But if they’d put that same £20,000 into a pension, they’d get £4,000 in tax relief upfront - and the government would add another £5,000 if their employer matched contributions. The ISA doesn’t beat that. It just sits there, quietly, doing less than it could.
It’s Not a Substitute for Emergency Savings
Too many people use their ISA as a rainy-day fund. Don’t. ISAs are for long-term growth. If you need to dip into them for rent, car repairs, or a broken boiler, you’re hurting your future self. The money you take out won’t grow again. And if you’ve invested in volatile assets, you might be selling at a loss. Your emergency fund should be in a separate, easy-access savings account - not locked up in an ISA where you can’t get it fast, and where you risk losing value.What You Should Do Instead
Use your ISA wisely - but don’t let it become your only savings tool. If you’re a higher-rate taxpayer, max it out. If you’re not, prioritize your workplace pension first. Use your ISA for investments you’d hold for 10+ years - like index funds or dividend stocks. Keep your emergency cash separate. And never, ever treat your ISA like a checking account. It’s not meant for spending. It’s meant for compounding.Can I lose money in an ISA?
Yes - but only if it’s a Stocks and Shares ISA. Cash ISAs are protected up to £85,000 by the FSCS, but investment ISAs carry market risk. If the value of your shares or funds drops, you lose money. The FSCS doesn’t cover investment losses - only provider insolvency.
What happens if I withdraw money from my ISA?
You lose the tax-free allowance for that amount. If you take out £5,000, you can’t put it back in during the same tax year. The £20,000 limit is fixed - withdrawals don’t reset it. You’ll miss out on future tax-free growth on that money forever.
Is it better to have a Cash ISA or a Stocks and Shares ISA?
It depends on your timeline. If you need the money in 1-3 years, go with Cash ISA. If you’re saving for retirement or 10+ years out, Stocks and Shares ISA wins - historically, it returns 5-7% annually after inflation. But only if you stay invested through market ups and downs.
Can I have more than one ISA at a time?
Yes - but you can only pay into one of each type per tax year. You can hold a Cash ISA, a Stocks and Shares ISA, a Lifetime ISA, and an Innovative Finance ISA all at once. But you can only contribute to one of each in a single tax year. You can transfer money between them, but not add new cash to more than one of the same type.
Do I pay tax on ISA interest or gains?
No. All interest, dividends, and capital gains inside an ISA are tax-free. That’s the whole point. But remember - you still pay tax on income or gains outside your ISA. The ISA just shields what’s inside it.