The formation of neoclassical tearing modes (NTMs) severely limits the performance of a tokamak plasma by increasing the radial particle and heat fluxes from the core and can even lead to a plasma disruption. Indeed, NTMs are a serious consideration for the next step device, ITER. The appearance of a finite NTM magnetic island requires an initial “seed” island to be unstable and it is important to develop an understanding of the early evolution of this island. In this phase, the island is long and narrow and a significant contribution to its stability arises from the associated polarisation current. The effect of the polarisation current is sensitive to the plasma model used in the vicinity of the island separatrix. Here we present a gyro-kinetic calculation of the island stability that includes plasma cross-field diffusion in a narrow layer at the separatrix. The result of this is not only to smooth the density profile around the island separatrix, but also to introduce a dependence of the plasma properties on the position along the island’s flux surface in that vicinity. This paper compares the island’s stability with and without the diffusive layer and shows that a proper treatment of transport effects in the layer significantly reduces the impact of the polarisation current on the island’s stability, at least in the parameter range considered.