ISAs
An ISA stands for Individual Savings Account. It is not an investment in itself; it is simply a tax-efficient wrapper which will allow you to invest directly in a range of investments such as shares, bonds or collective investment schemes.
What is an ISA?
ISAs were introduced by the Government to encourage more people to save. Investing in an ISA allows you to shelter your money from the taxman as you can keep all the proceeds that you receive from that investment without paying income or capital gains tax.
You don't even have to declare your ISA on your tax return. There are two types of ISA either a Maxi or a Mini ISA.
Tax assumptions are those currently applicable and are subject to statutory change.
The value of the tax advantages will depend on your individual financial circumstances.
What's the difference between a Mini ISA and a Maxi ISA?
With a Maxi ISA you can invest up to £7,000 per tax year with one company. The full £7,000 can be invested in stocks and shares, or you can choose to split your money between up to £3,000 in a cash component and the remainder in stocks and shares.
There are two types of Mini ISA:
- the Mini stocks and shares ISA (with a maximum investment per tax year of £4,000)
- the Mini cash ISA (with a maximum investment per tax year of £3,000).
These can be held with the same or different companies.
If you want to invest more than £4,000 in stocks and shares through an ISA, you must open a Maxi ISA. You cannot take out a Mini ISA and a Maxi ISA in the same tax year.
Who is allowed to invest in an ISA?
To invest in an ISA you have to be aged 18 or over (16 for Mini cash ISAs) and ordinarily resident in the UK for tax purposes. You cannot hold an ISA jointly with a spouse or anyone else.
What are the tax benefits of an ISA?
Under current UK tax rules, all ISA investments are free of personal income and capital gains taxes. The value of the tax advantages will depend on your individual financial circumstances.
How many ISAs can I have?
There are limits on the number of ISAs you can take out each tax year. You can only put money into either one Maxi ISA or up to two Mini ISAs - one for cash and one for stocks and shares.
However, you can still hold onto ISAs from previous tax years. So you may end up with several ISAs.