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)
  • 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*
  • 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.

The value of investments and the income they produce can fall as well as rise, you may get back less than you invested.

Investors do not pay any personal tax on income or gains, but ISAs do 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.

What out clients say about us

Stephen, Kent
Stephen, Kent
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James took the time to make sure he understood my circumstances before giving me some excellent advice on how I could maximize the tax efficiency of my investments and thus my retirement income.
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John, London
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James was incredibly understanding about what goals I wanted to prioritize. The key, for me, was to have it explained in simple terms. This enabled me to take out the right personal protection and pension plan. Trust is probably the most important part of this process. I felt/feel confident that James helped me make the right plans to safeguard my family’s future.
Peter, Tunbridge Wells
Peter, Tunbridge Wells
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James was highly professional and set me up with an investment plan that fit my needs and risk appetite. 5 out of 5 Stars
Joseph, London
Joseph, London
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I had multiple pension pots from previous employers and was looking for advice on whether to consolidate these plans. James undertook an honest and detailed analysis of my policies allowing me to make a fully informed decision on the best way to proceed. Highly recommended.
Matthew, London
Matthew, London
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I was looking to set up a pension plan as I had been given a generous allowance from my company. James advised on product and fund selection tailored to my personal circumstances and attitude to risk. Once the correct product had been identified. He facilitated all areas of setup and continues to manage things moving forward. 5 out of 5 Stars
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