ISAs explained

  • ISAs are tax-efficient accounts designed to encourage people to save money
  • You can put money into your ISA up to a set amount each year
  • If you are 16 or over and resident in the UK for tax purposes you can apply for a cash ISA, but you need to be 18 or over to apply for a stocks and shares ISA
  • The overall amount you can save in an ISA this tax year is £15,000. You can choose to invest any remaining allowance in a cash ISA, a stocks and shares ISA or a combination of both providing you don't invest more than £15,000 in total during the 2014/15 tax year.
  • Individual Savings Accounts (ISAs) were introduced by the Government to encourage more of us to save, and you're allowed to save up to your total ISA allowance for each tax year.

Cash ISAs are like a normal savings deposit account, but with a limit to how much you can pay into them each 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. Here the value of your investment can go up or down, and you may get back less than you originally invested.

  • How do ISAs save you tax?

    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.

  • Who can have an 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.

  • Is it difficult to transfer money between ISA providers?

    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 without affecting your yearly allowance. But you can’t move a stocks and shares ISA into a cash ISA.

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