ISAs explained

ISA stands for Individual Savings Account.

The main difference between an ISA and any other savings account is that it offers tax-free interest payments, so you could get more for your money.

There are 4 types of ISA: cash ISAs, stocks and shares ISAs, innovative finance ISAs and lifetime ISAs.

At Nationwide we offer cash ISAs and stocks and shares ISAs.

Your ISA allowance is the most you can save in an ISA in each tax year. For 2021/22, the allowance is £20,000. Some non-ISA savings accounts let you save up to £5 million every year.

You can split your allowance across the different types of ISA. For example, you could save some in a cash ISA and invest some in a stocks and shares ISA.

ISA flexibility allows you to replace any money you take out of your ISA during a single tax year without it counting towards your annual ISA allowance.

More about ISA flexibility

Your PSA is set by the Government. It means that, depending on the income tax rate you pay, you could earn up to £1,000 in interest in a non-ISA savings account during a single tax year, without having to pay tax on your interest.

Interest you earn on any ISA you hold doesn't count towards your PSA, because it's already tax-free.

More about PSA

Cash ISAs are tax-free savings accounts. You pay no tax on the interest you earn.

There are both fixed rate and instant access options available.

You don't need a large lump sum to get started with cash ISAs. You can open some ISAs with as little as £1. And with instant access ISAs, you can put money in whenever you like.

Many instant access ISAs also let you take your money out whenever you need it. With ISA flexibility you'll be able to replace this, in the same tax year, without impacting your ISA allowance.

You can only have one 'active' cash ISA every year. This means that you can’t open multiple cash ISAs in a single tax year and benefit from the tax-free savings allowance in each of these cash ISAs.

When you open one or more cash ISA products with us, they'll form part of a portfolio cash ISA. This means that although you can pay money into your different ISA products, you'll only be paying into one portfolio cash ISA.

We've set up our cash ISA in this way so that you can spread your annual ISA allowance across different products. For example, you could pay part of it into a fixed rate product and part into an instant access product.

Our portfolio cash ISA is also flexible. So, you can take money out of one cash ISA product and replace it in another in the same tax year without it counting towards your annual ISA allowance. This is so long as the products you have allow this — some cash ISA products limit how much you can take out or pay in.

Smart Junior ISA and Child Trust Fund Maturity ISA are stand-alone cash ISAs. They cannot be included in the portfolio cash ISA.

See our cash ISAs

You can think of a stocks and shares ISA as a wrapper that sits around a portfolio of investments. This wrapper means you have no tax to pay on any dividends, growth, interest or income you get from the investments.

If you're happy to invest for at least 6 years, a stocks and shares ISA could help you beat inflation and build a nest egg for the future. You'll need to be 18 or over and a Nationwide member.

You can open our Stocks and Shares ISA with a lump sum, or make regular contributions from as little as £20 per month.

You can only open one stocks and shares ISA, with one ISA provider, during a tax year.

Keep in mind, the value of your investments can go down as well as up, so you may get back less than you first put in.

More about stocks and shares ISAs

More about investments