What is an ISA?
Each tax year – which runs from 6 April until 5 April the next year – you have a limit on how much money you can save in an ISA. This is your annual ISA allowance, and you can’t go above this limit. You can save up to £15,240 for the current tax year in either a cash ISA, a stocks and shares ISA or a combination of both. You are limited on how many ISAs you can subscribe to each tax year.
The Help to Buy: ISA allowance is lower than the overall ISA allowance as you can only make an initial deposit of up to £1000 and up to £200 per calendar month (including the month of account opening). Your remaining allowance can only be invested in to a stocks and shares ISA (contributions to a Help to Buy: ISA and a Stocks and Shares ISA should not exceed the overall limit of £15,240).
You can only put money into one cash ISA and/or one stocks and shares ISA in each tax year and you must make sure you don't exceed the total maximum allowance. The only exception is for customers who have opened a separate cash ISA or stocks and shares ISA to pay in an Additional Permitted Subscription allowance following the death of a spouse or civil partner.
Cash ISAs are like a normal savings deposit account, but with a limit to how much you can pay into them each year. With a cash ISA you can make the most of your savings because the interest earned is free from tax, which you may have to pay on other savings accounts. If you have a savings account, it might make sense for it to be a cash ISA.
Cash ISAs are simple to open and in many ways no more complicated than a standard savings account. Despite this, many people haven't opened an ISA and a lot of those people have savings elsewhere. If you are keeping your savings in a regular bank or building society account, you could be paying unnecessary tax on the interest (and you may not realise you’re paying this tax as the bank deducts it automatically).
The main difference between cash ISAs and other savings accounts is that once you’ve paid in your full year’s ISA allowance, if you withdraw some money you can’t replace any of the money you’ve withdrawn in the same tax year.
Stocks and shares ISAs are another way to invest up to your annual ISA limit, in a fund that’s linked to the performance of the stock market. They are one of the most tax efficient ways to invest in a range of investments because you have no personal liability for income tax or capital gains tax (although the tax paid on any dividends within your fund cannot be reclaimed). However, the value of such an investment will go up and down, and you may get back less than you originally invested.
The interest on cash ISAs is tax free. This means that, while you normally pay income tax on interest in other savings accounts, you don't pay any on cash ISA interest. You do not pay any additional personal income tax or capital gains tax on any money you earn from a stocks and shares ISA.
You just need to be 16 or over to apply for a cash ISA, and 18 or over to apply for a stocks and shares ISA – and a UK resident for tax purposes in both cases. Crown employees living abroad (such as diplomats and members of the armed forces) can also apply.
You can often transfer your ISA (either type) between different providers – you will need to ask your new ISA manager to arrange the transfer for you. You can also move money from a cash ISA into a stocks and shares ISA or vice versa without affecting your yearly allowance, unless you are transferring current tax year contributions.
No. You can open many cash ISAs for as little as £1. Stocks and shares ISAs generally have higher minimum contributions.
During this tax year you can save up to £15,240 in a cash ISA, a stocks and shares ISA or a combination of both options. The Help to Buy: ISA allowance is lower than the overall ISA allowance as you can only make an initial deposit of up to £1000 and up to £200 per calendar month (including the month of account opening). Your remaining allowance can only be invested in to a stocks and shares ISA (contributions to a Help to Buy: ISA and a Stocks and Shares ISA should not exceed the overall limit of £15,240).
The tax year runs from April 6 in one year to April 5 in the following year.
A variable rate ISA offers you a rate of interest which can go up and down. With a fixed rate ISA you know in advance what your interest rate will be over your selected fixed term.
You must not pay into more than one cash ISA in any one tax year. The only exception is if you have opened a separate cash ISA to pay in an Additional Permitted Subscription allowance following the death of a spouse or civil partner.
It’s up to you. Variable rate cash ISAs offer savers instant access to their money. Fixed rate ISAs offer savers a higher rate of interest if you can lock your savings away for 2 years or more (withdrawal charges will apply). Stocks and shares ISAs may be more appropriate if you are looking to invest for a period of 5 to 10 years.
Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.
Lloyds Bank Private Banking Ltd. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 122626.
Authorisation can be checked on the Financial Services Register at www.fca.org.uk.
Eligible deposits with us are protected by the Financial Services Compensation Scheme. We are covered by the Financial Ombudsman Service. Please note that due to FSCS and FOS eligibility criteria not all Mayfair Private Banking non-personal customers will be covered. We subscribe to the Lending Code; copies of the Code can be obtained from www.lendingstandardsboard.org.uk.
Lloyds Bank plc Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065.
Lloyds Bank Private Banking Ltd. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2019697.
PhoneBank® is a registered trademark of Lloyds Bank plc.