ISA stands for ‘Individual Savings Account’. ISAs were launched by the government to encourage people to save for the future, by allowing a certain amount of money to be invested each year in a special tax-efficient account.
There is a limit on how much you can invest each year, and there are a few other conditions relating to ISAs that you’ll need to know.
ISAs come in two types, Cash ISAs and Stocks and Shares ISAs, and there are rules surrounding how much you can invest in each.
How are ISAs tax-efficient?
The interest you earn on cash saved in a Cash ISA is tax free. You don’t have to pay capital gains tax on investments in your Stocks and Shares ISA.
Your Choice of ISA
There are limits on how much you can pay into ISAs. To help you decide which is best for you, please contact us.
- Cash ISAs
Up to £3,600 of your £7,200 ISA allowance (from 2008/09 tax year) can be saved in a Cash ISA with one provider. .
- Stocks and Shares ISAs
The remainder of your annual ISA allowance, up to a maximum of £7,200 can be invested in Stocks and Shares either with the same or a different provider.
You can invest all of your annual ISA allowance of £7,200 into a Stocks and Shares ISA, in which case you would not be able to make any contributions to a Cash ISA in the same tax year.
Who Can Open an ISA?
Any UK resident, but the minimum age you have to be to open a Cash ISA is 16, and 18 for a Stocks and Shares ISA.
Cancelling your ISA
All our ISAs have a 14-day cooling off period during which you can change your mind. This starts from either:
- The day the account was opened,
- The day you receive the account Terms and Conditions and other information (either on paper or electronically) whichever is the later.
When you open your ISA you will get a letter explaining ways you can cancel if you want to. If you decide to cancel within 14 days, you can either withdraw the money you deposited or transfer it to another account. If you do decide to cancel within the 14 day cancellation period, you can still invest in an ISA elsewhere. If you decide to cancel you can either switch accounts or have all your money back including all interest earned during that time (interest will be paid net even if you are cancelling an ISA).
Law and Taxation
The information on this page is based on our understanding and interpretation of current and proposed legislation and HM Revenue and Customs practice, which is subject to change. The value of any tax relief is dependent on personal financial circumstances. The tax-efficient status of ISAs is granted by the Government and could change at any time in the future.