Individual Savings Accounts (ISAs)
ISAs represent a tax-efficient container in which to place your savings.
They can be cash savings or investments in equities, bonds and collectives.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax Efficiency
Designed to encourage new saving they are attractive to investors seeking a tax-efficient investment vehicle with the potential for higher returns. There is usually a low level of minimum subscription and no minimum period of investment. There is a maximum annual allowance that can be paid into ISA.
This can be split between cash and stocks & shares ISAs. You can only open one cash ISA and one Stocks and Shares ISA to put new money into each tax year. But you can also open other ISAs to transfer old ISAs into.
Withdrawals from an ISA can be made at any time with all gains free from tax but it is only possible to hold one ISA per tax year, so if an ISA is closed within the same tax year that it was opened, another one cannot be started until the next tax year.
ISA Investors do not pay any personal tax on income or gains, but ISAs may pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Tax treatment varies according to individual circumstances and is subject to change.
Stocks and Shares ISAs invest in Corporate bonds; stocks and shares and other assets that fluctuate in value.
Frequently asked questions
- What is the maximum subscription per annum?
In the tax year 2023/24, the maximum annual subscription is £20,000. This can be split between Cash and Stocks & Shares.
- What is the minimum age requirement for an ISA?
For a Cash ISA the minimum age requirement is 16. For Stocks & Shares it is 18.
- Are there penalties for taking your money out?
Unless it is a fixed rate Cash ISA, there are usually no penalties for taking your money out.
A fixed rate Cash ISA allows you to secure a potentially higher interest rate but your money is locked in for a set period. If you wish to withdraw it early, you may have to pay a penalty, usually in the form of giving up some or all of the accrued interest.
