05 March 2018

What you need to know about ISAs in 2018

Every tax year, anyone over 16 and a UK resident can save in an Individual Savings Account – an ISA – which lets you save without having to pay UK income tax or capital gains tax on the returns.

In the current tax year, ending on 5 April 2018, the annual ISA allowance is £20,000. This limit will stay the same for 2018-19.

You can invest in one ISA or split your allowance between different kinds. This flexibility could help you get more from your money. You can only subscribe to one cash ISA provider each tax year.

What is an ISA?

ISAs come in different kinds but are all savings and investment tools that let you keep tax-free returns on your investment. Think of them as a protective wrapper around your money.

There are four types of ISAs, offering different ways to save or invest. They are: the Cash ISA, the Stocks & Shares ISA, the Lifetime ISA and the Innovative Finance ISA. Not all ISA providers offer all of these types.

Watch Sam explain what an ISA is in 30 seconds

An Individual Savings Account or ISA is a way to save or invest without paying income tax on any interest you earn.

And this year they will have been around for 19 years.

At the start of each tax year you get a new ISA allowance, its currently at £20,000.

Now the rules have relaxed a couple of years ago so that money could be taken out and replaced in the same year without it affecting this allowance.

But remember if you don’t use your full allowance by the end of the tax year you can’t carry it forward.

ISAs come in many forms and the one you go for depends entirely on your savings goals.

Find out more about Nationwide’s ISA range at nationwide.co.uk/isa

What types of ISAs are available?

According to Google trends*, the number of online searches for cash ISAs has dropped in the last five years, while online searches for stocks & shares ISAs have grown, reaching a peak in 2017.

This is because cash ISA interest rates have fallen and ISA savers have been looking for other ways to beat inflation. Returns from some stocks & shares ISAs can do this.

Your choice depends on your personal savings goals and the level of risk you're willing to take. You can lose money, especially over the short term, because stock market investments can fall in value as well as rise.

If you're looking for a guaranteed steady income over a period of less than five years, a cash ISA may be suitable. If you're willing to take more risk and invest over the longer term, a stocks & shares ISA could deliver higher returns and may be a better option.

Whatever type of ISA you're looking for, Nationwide has a range of new ISA products that could help make your money work harder for you. Find out more about Nationwide's range of ISAs.

Cash ISAs

Cash ISAs are available to UK residents aged 16 and over. They come either as easy-access cash ISAs, with no penalty for withdrawals, or as fixed-rate ISAs, which pay a higher interest rate but usually charge a fee for withdrawals.

Interest from a cash ISA is tax-free, year after year, so you keep all the interest you receive. With other savings accounts, you could be liable to pay tax on the interest you receive, if this exceeds your Personal Savings Allowance.

Nationwide offers a range of cash ISAs.

Stocks & Shares ISAs

Stocks & shares ISAs, also known as investment ISAs, are different from cash ISAs. You're investing rather than saving, so they're riskier but could potentially offer higher returns.

That depends on the performance of the investment fund, which could include company shares, government bonds or mixed funds.

The value of your investment can go down as well as up, so you may get back less than you originally invested. You need to be a UK resident, aged 18 or over to open a stocks & shares ISA.

Stocks & shares ISAs through Nationwide are provided by Cofunds.

Lifetime ISA

The lifetime ISA is designed to help you save for your first home (costing up to £450k) or for retirement after age 60. You can invest up to £4,000 in the 2017/18 tax year.

The Government will add a 25% bonus on top of any contributions made. If you need to withdraw for any other reason (apart from terminal illness or death), a penalty charge of 25% of the value withdrawn applies.

You can only open a Lifetime ISA if you are under 40 years of age.

Nationwide doesn't offer the Lifetime ISA.

Smart Junior ISA

Nationwide's Smart Junior ISA helps young people build their savings, the money becomes available when they reach 18. If the child is 16 or 17 they can open the Smart Junior ISA themselves or if they are younger a parent or legal guardian can open the ISA on behalf of the child.

There is no maximum balance as long as you stay within your Junior ISA allowance each tax year.

Innovative Finance ISA

The Innovative Finance ISA is geared towards peer-to-peer lending. Tax-free interest and tax-free capital gains can be received on funds lent through FCA-regulated peer-to-peer lending platforms.

Nationwide does not offer the Innovative Finance ISA.

How much can you save?

From 6 April 2018 to 5 April 2019 you can invest up to £20,000 in an ISA. If you want to invest across different types of ISAs, each can be held with separate providers.

You can invest all your annual ISA allowance into one type of ISA or split it. However, you can only invest in one of each type each tax year, and the annual investment limit on the Lifetime ISA is £4,000.

Each tax year you only get one chance to invest in an ISA because unused allowances can't be carried over to the next tax year – you either use it or lose it.

ISA flexibility means you can replace whatever cash you withdraw from your ISA in the same tax year, without affecting your annual ISA allowance. This is subject to the account's terms and conditions.

*Data source: Google Trends ( (This link will open in a new window)www.google.com/trends) January 2018

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