ISAs explained

- This Guide was written by Ant Tomlinson 29th October 2019

What are ISAs?

An Individual Savings Account, or ISA, is a tax-efficient approach to set aside or invest your money. You don’t pay Capital Gains Tax or Income Tax on any of the money you earn, therefore any interest or returns you make will remain yours. In a nutshell, you get to keep a greater amount of your money instead of paying it to the tax man.

Who can have an ISA?

UK residents aged 16 or over can set aside up to £20,000 in a Cash ISA. UK residents older than 18, can save in a Cash or a Stocks and Shares ISA or a mix of ISAs, as long as the commitments made don’t surpass the yearly ISA allowance.

What is the ISA limit for 2019/20?

The current ISA breaking point is £20,000 for 2019/20 (subject to change) and it’s been this sum for 2 years. The ISA allowance is always reported before the new tax year, which starts on the 6th April, and you have until the 5th April the following year to utilise your allowance, so ensure you capitalise on it before the cutoff time passes.

You can invest into any type of ISA, as long as your combined commitments don’t surpass the yearly ISA allowance for each ISA type.

You may hear of an ISA being referred to as a tax wrapper. This is because it can incorporate a number of different tax-efficient products and you can only have one of each ISA product during each tax year.

In the easiest terms, think of an ISA as a box of Cadbury Roses! You have various distinctive chocolate choices to pick from. They are all made of chocolate, however each have their own qualities and you can only have so many chocolates in one box!

What types of ISA are there?

There are six main ISA types you can choose from. The six different types are:

  • Cash ISA
  • Stocks and Shares ISA
  • Junior ISA (JISA)
  • Help to Buy ISA
  • Lifetime ISA (LISA)
  • Innovative Finance ISA (IFISA)

How much money can you save in an ISA?

As a recap, your ‘tax wrapper’ ISA allowance (which can change each year) is currently £20,000 and you can split it between the following ISA products:

  • Cash ISA – Up to £20,000
  • Stocks and Shares ISA – Up to £20,000
  • Junior ISA – Up to £4,368*
  • Help to Buy ISA – Up to £3,400 1st year then £2,400 yearly**
  • Lifetime ISA – Up to £4,000**
  • Innovative Finance ISA – Up to £20,000

*The Junior ISA allowance doesn’t count towards your individual £20,000 ISA allowance
** The Lifetime ISA and Help to Buy ISA allowance will form part of the £20,000 ISA limit.

Can I get an ethical ISA?

Indeed – There’s various ethical choices accessible to you when opening up an ISA account.

Ethical investing means different things to different people, so you’ll need to check that you’re happy with what’s included in your plan when investing ethically.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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HALCYON WEALTH LIMITED (Financial Conduct Authority No. 758949) is an appointed representative of Quilter Financial Planning Limited and Quilter Mortgage Planning Limited, which are authorised and regulated by the Financial Conduct Authority. Quilter Financial Planning Limited and Quilter Mortgage Planning Limited are entered on the FCA register under reference 440703 and 440718. The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.