UK investment withdrawals: ISA, GIA and capital gains tax

By GrowThenDraw Editorial Team · Updated July 26, 2026 · 9 min read · Editorial policy

A monthly withdrawal is mechanically simple: sell enough investments and move the cash to your bank. The tax result is not. The same sale can be tax-free inside a Stocks & Shares ISA, create a capital gain inside a general investment account, or fall under income-tax rules inside a pension.

This guide separates those accounts before doing any arithmetic. It also explains the exact 2026/27 capital-gains band calculation used by GrowThenDraw, including the case where one gain is partly taxed at 18% and partly at 24%.

First identify the account you are withdrawing from

The label matters more than the investment. The same fund can sit inside an ISA, GIA or pension and produce a different tax result in each wrapper. Check the account name on your provider statement before choosing the calculator option.

• Stocks & Shares ISA: investment income and capital gains inside the wrapper are tax-free. Ordinary ISA withdrawals do not create a capital-gains bill.
• General investment account (GIA): selling an investment can realise a capital gain. Tax is based on the gain, not the full cash withdrawal.
• SIPP or workplace pension: withdrawals can be taxed as pension income. Use a pension drawdown calculation, not a GIA capital-gains estimate.
• Lifetime ISA: special qualifying-withdrawal rules and a possible government withdrawal charge apply. The calculator's ISA option does not model a Lifetime ISA.

A GIA withdrawal is not all capital gain

Suppose investments now worth £100,000 cost £70,000. The embedded gain is £30,000, or 30% of the current value. A simple pooled-cost projection treats roughly 30% of a proportionate sale as gain and the rest as a return of cost. Withdrawing £10,000 would therefore realise an estimated £3,000 gain, not a £10,000 gain.

Actual share-disposal records can be more involved. HMRC first applies same-day matching and the 30-day matching rule; remaining shares of the same class are normally held in a Section 104 pool with an average allowable cost. Dealing costs, reorganisations, equalisation payments and earlier losses can also change the result. The calculator is a planning model, not a substitute for disposal records.

How the 2026/27 capital-gains calculation works

For individuals, the Capital Gains Tax Annual Exempt Amount is £3,000 in 2026/27. After deducting it, gains on shares and funds are generally charged at 18% to the extent they fit inside the unused basic-rate band, then 24% above that band.

The input the calculator needs is taxable income after the Personal Allowance and other Income Tax reliefs—not gross salary. The 2026/27 basic-rate band is £37,700. If taxable income is £20,000, £17,700 of the band remains before a taxable gain reaches the 24% rate.

HMRC's own straddle example uses £20,000 of taxable income and a £52,600 gain. After the £3,000 exemption, £49,600 is taxable: £17,700 at 18% and £31,900 at 24%, producing £10,842 of CGT. GrowThenDraw now follows that same band-splitting method rather than forcing the whole gain into one selected rate.

Stocks & Shares ISA withdrawals

Income and capital gains from investments held inside an ISA are tax-free. Selling an ISA investment and withdrawing the cash therefore does not create the GIA capital-gains calculation above.

Withdrawal mechanics still depend on the provider. An investment may take time to sell and settle, and a provider can impose dealing or withdrawal charges. Withdrawing also does not automatically restore the ISA allowance used to subscribe that money. Only a flexible ISA can allow certain replacement subscriptions without reducing the current-year allowance, and the provider's process must be followed.

Why a Lifetime ISA needs a different calculation

A Lifetime ISA can be withdrawn without the government charge for a qualifying first-home purchase, from age 60, or when terminally ill with less than 12 months to live. Other withdrawals normally carry a 25% charge on the amount withdrawn.

That 25% charge does more than remove the original bonus. In GOV.UK's no-growth example, £800 of personal savings plus a £200 bonus becomes £1,000; a £250 charge leaves £750. Because the GrowThenDraw ISA option does not test the qualifying conditions or deduct this charge, it should not be used for a Lifetime ISA withdrawal.

Tax and sustainability answer different questions

Tax tells you how much of a withdrawal you keep. Sustainability asks whether the investment can keep funding withdrawals through weak markets, inflation and fees. A tax-free ISA can still run out; a taxable GIA can still last if withdrawals are modest relative to its balance and returns.

Use several return assumptions rather than one smooth forecast. Compare a lower-return case, your central case and a stronger case. Then switch on annual withdrawal increases if the spending is intended to keep pace with inflation. The projected depletion date is a scenario result, not a guarantee.

A practical calculator checklist

• Choose Stocks & Shares ISA or GIA; do not use the ISA option for a pension or Lifetime ISA.
• Enter the current investment value and the cost attributed to the holdings still owned.
• For a GIA, enter taxable income after the Personal Allowance and Income Tax reliefs.
• Enter the monthly gross sale amount, investment return, fees and planning horizon.
• Test lower returns and rising withdrawals before relying on the central scenario.
• Use the result for planning, then use actual contract notes and HMRC guidance for reporting.