Individual Savings Accounts (ISAs) are a popular and simple way to save and you don't pay any personal income tax or capital gains tax on any profit you may make.
Individual Savings Accounts were introduced by the government in April 1999 to replace Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs) as a tax-efficient way to encourage people to save over the medium- to long-term.
To find out more about Individual Savings Accounts, see the Q&A section below. The information is based on our understanding of current taxation legislation, and HM Revenue & Customs practice, all of which is subject to change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances.
Please remember that the value of your investment may fluctuate and is therefore not guaranteed. You may not get back the full amount of your original investment.
Why is an Individual Savings Account tax-efficient?
You don't pay any personal income tax or capital gains tax on money held in an ISA.
Can I have more than one Individual Savings Account?
There are currently two types of Individual Savings Account: a cash ISA and a stocks and shares ISA.
Each tax year you can have a cash ISA with one provider and a stocks and shares ISA with the same or a different provider. The value of tax savings and your eligibility to invest in Individual Savings Accounts will depend on individual circumstances and tax rules may change in future.
How much can I invest in an Individual Savings Account?
The annual investment allowance is £20,000 in this tax year (2023/24). This can be split as you like between a cash ISA and/or an investment or stocks and shares ISA.
Who can have an Individual Savings Account?
You must be at least age 16 to open a cash ISA and age 18 to have a stocks and shares ISA. You must also be resident in the UK for tax purposes. If you move abroad and are no longer a UK taxpayer, you can continue to hold any existing ISA, but you won't be able to pay more money into it.
When can I put money into an Individual Savings Account?
Each tax year runs from 6 April to 5 April. You can invest at any time during this period. Most plans let you invest either as a lump sum or regular monthly amounts up to the subscription limits.
What does it cost to set up an Individual Savings Account?
The cost can depend on the management charge levied by the Investment provider/Fund, and/or and the type of Individual Savings Account you choose. There is normally no charge for a cash ISA, as the provider sets its interest rate at a level that covers the costs. With a stocks and shares ISA there is usually an adviser set-up fee and an annual management charge from the Investment Manager.
Cost is not the only consideration when choosing your Individual Savings Account. You should also think about:
Risk: Individual Savings Accounts offer a wide range of risk options, from cash ISAs, which carry minimal risk, to cautious managed funds that may be low to medium risk, right up to specialist equity portfolios that may be high risk.
Performance: investing in stocks and shares has the potential to give good rewards, but is riskier than cash, which has smaller potential rewards but tends to be more secure. This is a higher risk investment than a bank or building society. In a bank or building society your money is generally secure and readily accessible. Past performance is not a reliable indicator of future performance however, and the value of your investment may fluctuate and is therefore not guaranteed. Close monitoring of performance by way of our annual review, part of our Wealth Management service, is highly recommended.
Timescale: generally an Individual Savings Account (certainly a stocks and shares ISA) should be thought of as a medium to long term investment. The longer you can invest for, the less worried you might be about the short-term ups and downs (volatility) of the underlying investments, because over the longer-term the assets are expected to produce positive returns.
Accessibility: Do you have other money available which you can access ahead of your tax exempt savings. You should, where possible.
Can I switch funds?
You can easily switch funds and Investment Fund providers – that’s why we’re here – to help you make any necessary changes, year by year.
What happens to my Individual Savings Account if I die?
When you die, your Individual Savings Account investments and any income or growth stops being tax-efficient. The value of the investments in your Individual Savings Account is added to your estate and may be liable to Inheritance Tax.
