ISAs explained

What is an ISA?

  • Individual Savings Account (ISAs) let you save or invest tax-efficiently
  • Every tax year you can save or invest up to your annual ISA allowance limit (see below for more details)
  • The tax year runs from 6 April to 5 April the following year and we have a range of options to help you take full advantage of your annual ISA allowance

Options
There are two types of ISA:

  • Cash ISA: Deposit based savings account
  • Stocks & Shares ISA: Invest directly in stocks and shares

You can choose to save in a Cash ISA or invest in a Stocks and Shares ISA or a combination of both.

ISA allowance limits


Each year, you have an allowance that you can use for your ISA.

Your limits:

Current ISA allowance for single tax year:
Stocks & Shares ISA - Up to £7,200.
Cash ISA and Stocks & Shares ISA - Cash ISA up to £3,600, Stocks & Shares ISA up to £7,200 (including Cash ISA contribution).

Over 50's ISA allowance from 6 October 2009*:
Stocks & Shares ISA - Up to £10,200.
Cash ISA and Stocks & Shares ISA - Cash ISA up to £5,100, Stocks & Shares ISA up to £10,200 (including Cash ISA contribution).

*Applicible to people over 50 as at 05/04/2010.

You can either invest your entire allowance in a Stocks & Shares ISA. Or, you could invest some in a Cash ISA, with the remainder in a Stocks & Shares ISA. The maximum that you can invest in a Cash ISA is half of your entire allowance.

ISA limits are changing:
On 6 April 2010, everyone will be entitled to the new, higher £10,200 ISA limit.

Tax*
Normally when you save, you pay tax on any returns at your personal rate of income tax. Additionally if your gain is large enough, you might also be liable for Capital Gains Tax. This isn't the case with ISAs as there is no tax taken on returns. You don't even need to declare your ISA investments to the tax man.

Withdrawals
Depending on your particular ISA product, it may be possible to make withdrawals from your ISA.  However you can only pay in up to your limit, regardless of any withdrawals.

For example: If you pay in £3,600 into a Cash ISA and then withdraw £600, the amount paid in to the ISA is still £3,600 even though the balance is now £600 less. This means you can't pay any more money into the ISA within the same tax year as your allowance has been used.

Are you eligible?
To have an ISA you need to be:

  • A UK resident (Crown employees working overseas and spouses/civil partners are still eligible)
  • 16 or over for Cash ISA
  • 18 or over for Stocks & Shares ISA
  • An individual (companies, clubs, societies and so on are not eligible)

Please note you can only invest with one cash ISA provider in each tax year and the same, or another stocks and shares provider.

View our range of Cash ISA products

* Tax treatment is dependant on individual circumstances. The tax information provided is based on our current understanding of current law and HM Revenue & Customs practice which can change.