What is an ISA?

An ISA (individual savings account) is a tax-free savings account which can only be held by one person.

There are two types of ISA, a cash ISA and an investment ISA.

How much can I save?

You can save up to 15,240 in an ISA throughout this tax year - this figure is known as your ISA allowance.

  • You can use your ISA allowance at any time within the current tax year, which runs from the 6th April till the following 5th April.

  • You will get a new allowance each tax year, but you will not be able to carry any unused allowance from previous years across to the new year.

To make the most of your tax-free ISA allowance, try and save as much as possible into an ISA tax year.

Who can open an ISA

ISAs are available to all UK residents over the age of 16, although you must be over 18 to invest in a stocks and shares ISA component.

You have an individual tax allowance each tax year, which you can use to fund an ISA, but cannot be held in joint names or as a trustee account.

Crown employees working overseas but paid by the British Government* are also eligible for an ISA allowance, as are their spouses.

* military personnel or diplomats.

Are you under 18?

Junior ISAs are available for children under the age of 18, read this guide to find out whether you are eligible.

What ISAs can you have?

You can invest your ISA allowance into a cash ISA, investment ISA or a combination of both.

You can transfer your cash ISA into an investment ISA, and vice versa, giving you extra flexibility with your tax-free savings.

Historic ISAs

From the 6th April 2008, the following accounts automatically became cash ISAs:

  • Maxi cash ISA

  • Mini cash ISA

And the following accounts automatically became investment ISAs:

  • Maxi stocks & shares ISA

  • Mini stocks & shares ISA

  • Mini ISAs: These were made up of 2 components; a 3,000 cash allowance and a 4,000 stocks and shares allowance, each of which could be taken from a different financial provider.

  • Maxi ISAs: These were more flexible as while they allowed you to invest up to 3,000 in a cash component, they enable you to invest up to your whole 7,000 allowance in stocks and shares if you wished.

  • PEPs and TESSAs: ISAs replaced PEPs and TESSAs in 1999 and have been guaranteed to run in their current form indefinitely.

Choose the right ISA for you


Do you need access to your money?


The type of Cash ISA you open will depend on how often, if at all, you'll need to access your deposited money. If you'll need to access your money then choosing a Cash ISA that offers instant/easy access is a must.

Alternatively, if you're willing to tie up your money for a number of months or even years then a fixed term option may be more profitable as they tend to offer better returns.


How frequently will you deposit?


Some prefer to deposit one single lump sum and leave it to accrue interest throughout the tax year.

Or, you may like to make several small deposits regularly; either way, this will impact what kind of Cash ISA you choose.

Consider too how much you will wish to deposit at a time, as some providers have minimum and maximum thresholds in place.


How much will you deposit?


You should check if there's a minimum deposit that must be made in order to qualify for this rate, then decide whether or not you are prepared to deposit this amount.

Some providers offer a much higher rate if you are depositing larger amounts of money.


Will you be transferring existing money?


If you're planning to open your account with money transferred from an existing Cash ISA, this will influence which provider you choose. Some providers don't allow you to open a new account with money transferred from an existing ISA.

Alternatively, you may simply want to invest new money into the Cash ISA in the future tax year, in which case you'll be able to pick from a wider selection of providers.


Will you be charged for moving your money?


Many Cash ISA providers place restrictions on how and when you can access your money.

So, when you look for a new Cash ISA it's really important to check whether you will be penalised for making withdrawals*

* There may be a charge or interest penalty, or you may be required to give a certain amount of notice.