Key details:

• An ISA is an ‘Individual Savings Account’ which can be bought by residents of the United Kingdom. An ISA helps you to save and invest tax efficiently.
• There are four different kinds of ISA:  a cash ISA, a stocks and shares ISA, a Lifetime ISA, an innovative finance ISA.
• You can subscribe to the four types of ISA in lots of combinations, as long as you do not exceed the annual ISA Allowance, currently £20,000. 
• To apply for a cash ISA, you must be at least 18 and a resident in the UK for tax purposes.

The ISA Allowance

Each tax year (6 April one year to 5 April the following year) the government sets a limit on the amount you can save in an ISA, currently this limit is £20,000.

You can only pay into one cash ISA in any tax year up to the annual limit. Total contributions per tax year across all four ISA types cannot be above £20,000.

• Cash ISA up to £20,000
• Stocks and shares ISA up to £20,000
• Innovative finance ISA up to £20,000
• Lifetime ISA up to £4,000.

Some ISAs are flexible and allow you to make withdrawals and later pay back in to the account during the same tax year and not affect your ISA Allowance.

Cash ISAs

A cash ISA is a savings account where as your money grows you don’t pay tax on the interest you earn. You can choose to have easy access to your money and withdraw free of charge. The rate you receive on this account will be variable. 

You can also decide to lock your money away as this may help you get a higher fixed interest rate, but you may be charged for any early withdrawal.

Please remember:

You can only put money into one cash ISA in a tax year, but you can also pay into any other ISA for which you are eligible in each tax year. 

You may lose money if you close a fixed cash ISA before the end of its term.

Stocks and Shares ISAs

A stocks and shares ISA allows you to hold a range of investments. The income and profits from investments are protected from Income and Capital Gains tax. You may want to build your own portfolio using a share dealing ISA, choosing from a wide offering of investments.

The value of an investment and the income from it can go down as well as up and you may get back less than you invest.