At a glance

  • An ISA is a tax-efficient savings account
  • You can save or invest £20,000 each tax year into it
  • It’s a good place for long-term savings
  • It is best to make the most of it each year, as you can’t carry any unused allowances forward

At a glance

  • An ISA is a tax-efficient savings account
  • You can save or invest £20,000 each tax year into it
  • It’s a good place for long-term savings
  • It is best to make the most of it each year, as you can’t carry any unused allowances forward

At a glance

  • An ISA is a tax-efficient savings account
  • You can save or invest £20,000 each tax year into it
  • It’s a good place for long-term savings
  • It is best to make the most of it each year, as you can’t carry any unused allowances forward

What is an ISA?

ISA stands for Individual Savings Account.

It is a way to save money tax-free. Your savings can grow within an ISA and you don’t have to pay any tax on the interest or tax on any rise in value of the money or investments within it. This makes an ISA a good way to save money for the long term.

How does an ISA work?

Everyone has their own individual ISA allowance each tax year (which runs from April 6 for 12 months). 

You can save money in an ISA by putting in a lump sum or adding amounts when you have spare cash. Or you can set up a regular payment each month that goes directly into your ISA.

How much can I save in an ISA?

Each person has an ISA allowance of £20,000 per tax year. This is the maximum you can save in a tax year. If you don’t use up your whole allowance in that year, you can’t carry it over until the next year.

How do I open an ISA?

ISAs are available from lots of different providers, including banks, building societies and investment companies. The type of ISA you choose will depend on what you are saving the money for, and how long you plan to save.

If you want to save money for a house deposit, for example, or you want to save money as a student, then you might want to consider a Cash ISA.

If you are investing for the longer term and don’t need the money soon, you could think about a Stocks & Shares ISA, which invests in the stock market and provides some protection against inflation. There are a number of other types of ISA (see below) which are suitable for different needs.

Who should get an ISA?

Anyone can open an ISA. You can start with a cash investment aged 16 or a stock market investment at 18. If you want to save money from your salary, job or other income source then you can start with small, regular amounts and increase the contributions when you have more disposable income. Or you can open an ISA with a lump sum.

What are the pros and cons of an ISA?

The great advantage of an ISA is that your funds are protected from tax as they grow. You do not pay tax on interest on cash in an ISA or income or capital gains from investments in an ISA.

If you need to complete a tax return for HM Revenue & Customs (HMRC), you do not need to give details of any interest, income or gains that you have made within your ISA.

You do not have to pay any extra charges for keeping your money within an ISA, and you can choose how much you want to contribute to it.

The main drawback is that if you take the money out of your ISA you will need to put it back within the same year, or your allowance will be lost. You cannot carry your allowance forward to the next tax year.

If you invest in an ISA that holds stocks and shares, you might see the value of your holdings fall if the stock market falls. Therefore, you are better using your ISAs as a longer-term investment (five to ten years) if you plan to buy shares or funds in it.

How do I get an ISA?

You can open an ISA with a lump sum payment or by setting up a direct debit arrangement for regular payments with your chosen provider.

How much do I need to open an ISA?

You don’t need to start with a lot – remember that small, regular amounts can grow to quite sizeable sums over time. Generally, you can open a Cash ISA with just £1, while investment companies usually ask for an initial deposit of £25 to start with – although this differs between providers, and some may ask for a minimum of £100.

What do I need to know before opening an ISA?

The main benefit of ISAs is that they are tax-efficient. Over the long term, this can be an advantage, especially if you invest in a Stocks & Shares ISA and the investments grow.

What types of ISAs are available?

Cash ISA

A Cash ISA is just like a normal savings account with a bank or building society. You can choose an instant-access or a fixed-term Cash ISA, and it is open to anyone over 16.

The difference between a Cash ISA and a savings account is that there is a limit of £20,000 for the ISA, but when you earn interest you will not have to pay any tax on it.

Cash ISAs are the least risky option, but interest rates are currently very low. This means that over time, the value of your cash will be eroded in real terms. However, if you are saving for the short term (one to three years) this might be the best place for your money.

Stocks & Shares ISA

You must be 18 or over to invest in a Stocks & Shares ISA, which is basically a tax-efficient wrapper in which you can hold shares, funds, investment trusts and bonds.

This carries a higher risk than cash, because these types of investments can rise and fall as the stock market value changes. For this reason, this type of ISA is better for longer term money.

The advantage of a Stocks & Shares ISA is that you don’t pay any tax on capital gains (the increase in underlying value of your holdings) or income (which is usually in the form of dividends paid by companies to their investors at regular intervals). Over time, that can significantly boost the value of your savings.

It's worth noting that the value of a Stocks & Shares ISA can fall, and you could end up with less than you invested. That’s why a Stocks & Shares ISA is suitable for an investment horizon of five years or more. You can hold cash here for a short period while you decide where to invest it.

Innovative Finance ISA (IFISA)

With this type of ISA, you lend your money to borrowers in return for a fixed amount of interest. These ISAs can offer higher rates of interest than Cash ISAs but there is a reason for this – they are much higher risk and your capital is not protected.

While the returns can look reasonably attractive, the risk is that the borrower could default on their repayments. IFISAs are not covered by the Financial Services Compensation Scheme, so your money could be at risk if the IFISA provider goes bust.

Lifetime ISA (LISA)

The LISA is designed to either help people get on the property ladder or boost their retirement savings.

The government will top up what you invest with an additional 25% bonus. In other words, for every £4 you save, the government will add £1.

You are limited to investing a maximum of £4,000 each tax year. (That amount counts towards your overall £20,000 allowance).

You can invest more than £4,000 but you won’t get the bonus on the extra savings. The top-up is paid up to the age of 50, so that could add up to a maximum bonus of £33,000.

Any UK resident aged between 18 and 39 is eligible to open a LISA. One thing to be aware of: you can use your LISA to buy your first home or you can leave it to grow until you are 60 – but if you withdraw money for any other reason you will lose the 25% bonus.

 

St. James's Place do not offer an IFISA or a LISA.

The value of a Stocks & Shares ISA will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.  

A Stocks & Shares ISA does not provide the security of capital associated with a Cash ISA.

The favourable tax treatment given to ISAs may not be maintained in the future, as they are subject to changes in legislation.

What is an ISA?

ISA stands for Individual Savings Account.

It is a way to save money tax-free. Your savings can grow within an ISA and you don’t have to pay any tax on the interest or tax on any rise in value of the money or investments within it. This makes an ISA a good way to save money for the long term.

How does an ISA work?

Everyone has their own individual ISA allowance each tax year (which runs from April 6 for 12 months). 

You can save money in an ISA by putting in a lump sum or adding amounts when you have spare cash. Or you can set up a regular payment each month that goes directly into your ISA.

How much can I save in an ISA?

Each person has an ISA allowance of £20,000 per tax year. This is the maximum you can save in a tax year. If you don’t use up your whole allowance in that year, you can’t carry it over until the next year.

How do I open an ISA?

ISAs are available from lots of different providers, including banks, building societies and investment companies. The type of ISA you choose will depend on what you are saving the money for, and how long you plan to save.

If you want to save money for a house deposit, for example, or you want to save money as a student, then you might want to consider a Cash ISA.

If you are investing for the longer term and don’t need the money soon, you could think about a Stocks & Shares ISA, which invests in the stock market and provides some protection against inflation. There are a number of other types of ISA (see below) which are suitable for different needs.

Who should get an ISA?

Anyone can open an ISA. You can start with a cash investment aged 16 or a stock market investment at 18. If you want to save money from your salary, job or other income source then you can start with small, regular amounts and increase the contributions when you have more disposable income. Or you can open an ISA with a lump sum.

What are the pros and cons of an ISA?

The great advantage of an ISA is that your funds are protected from tax as they grow. You do not pay tax on interest on cash in an ISA or income or capital gains from investments in an ISA.

If you need to complete a tax return for HM Revenue & Customs (HMRC), you do not need to give details of any interest, income or gains that you have made within your ISA.

You do not have to pay any extra charges for keeping your money within an ISA, and you can choose how much you want to contribute to it.

The main drawback is that if you take the money out of your ISA you will need to put it back within the same year, or your allowance will be lost. You cannot carry your allowance forward to the next tax year.

If you invest in an ISA that holds stocks and shares, you might see the value of your holdings fall if the stock market falls. Therefore, you are better using your ISAs as a longer-term investment (five to ten years) if you plan to buy shares or funds in it.

How do I get an ISA?

You can open an ISA with a lump sum payment or by setting up a direct debit arrangement for regular payments with your chosen provider.

How much do I need to open an ISA?

You don’t need to start with a lot – remember that small, regular amounts can grow to quite sizeable sums over time. Generally, you can open a Cash ISA with just £1, while investment companies usually ask for an initial deposit of £25 to start with – although this differs between providers, and some may ask for a minimum of £100.

What do I need to know before opening an ISA?

The main benefit of ISAs is that they are tax-efficient. Over the long term, this can be an advantage, especially if you invest in a Stocks & Shares ISA and the investments grow.

What types of ISAs are available?

Cash ISA

A Cash ISA is just like a normal savings account with a bank or building society. You can choose an instant-access or a fixed-term Cash ISA, and it is open to anyone over 16.

The difference between a Cash ISA and a savings account is that there is a limit of £20,000 for the ISA, but when you earn interest you will not have to pay any tax on it.

Cash ISAs are the least risky option, but interest rates are currently very low. This means that over time, the value of your cash will be eroded in real terms. However, if you are saving for the short term (one to three years) this might be the best place for your money.

Stocks & Shares ISA

You must be 18 or over to invest in a Stocks & Shares ISA, which is basically a tax-efficient wrapper in which you can hold shares, funds, investment trusts and bonds.

This carries a higher risk than cash, because these types of investments can rise and fall as the stock market value changes. For this reason, this type of ISA is better for longer term money.

The advantage of a Stocks & Shares ISA is that you don’t pay any tax on capital gains (the increase in underlying value of your holdings) or income (which is usually in the form of dividends paid by companies to their investors at regular intervals). Over time, that can significantly boost the value of your savings.

It's worth noting that the value of a Stocks & Shares ISA can fall, and you could end up with less than you invested. That’s why a Stocks & Shares ISA is suitable for an investment horizon of five years or more. You can hold cash here for a short period while you decide where to invest it.

Innovative Finance ISA (IFISA)

With this type of ISA, you lend your money to borrowers in return for a fixed amount of interest. These ISAs can offer higher rates of interest than Cash ISAs but there is a reason for this – they are much higher risk and your capital is not protected.

While the returns can look reasonably attractive, the risk is that the borrower could default on their repayments. IFISAs are not covered by the Financial Services Compensation Scheme, so your money could be at risk if the IFISA provider goes bust.

Lifetime ISA (LISA)

The LISA is designed to either help people get on the property ladder or boost their retirement savings.

The government will top up what you invest with an additional 25% bonus. In other words, for every £4 you save, the government will add £1.

You are limited to investing a maximum of £4,000 each tax year. (That amount counts towards your overall £20,000 allowance).

You can invest more than £4,000 but you won’t get the bonus on the extra savings. The top-up is paid up to the age of 50, so that could add up to a maximum bonus of £33,000.

Any UK resident aged between 18 and 39 is eligible to open a LISA. One thing to be aware of: you can use your LISA to buy your first home or you can leave it to grow until you are 60 – but if you withdraw money for any other reason you will lose the 25% bonus.

 

St. James's Place do not offer an IFISA or a LISA.

The value of a Stocks & Shares ISA will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.  

A Stocks & Shares ISA does not provide the security of capital associated with a Cash ISA.

The favourable tax treatment given to ISAs may not be maintained in the future, as they are subject to changes in legislation.

What is an ISA?

ISA stands for Individual Savings Account.

It is a way to save money tax-free. Your savings can grow within an ISA and you don’t have to pay any tax on the interest or tax on any rise in value of the money or investments within it. This makes an ISA a good way to save money for the long term.

How does an ISA work?

Everyone has their own individual ISA allowance each tax year (which runs from April 6 for 12 months). 

You can save money in an ISA by putting in a lump sum or adding amounts when you have spare cash. Or you can set up a regular payment each month that goes directly into your ISA.

How much can I save in an ISA?

Each person has an ISA allowance of £20,000 per tax year. This is the maximum you can save in a tax year. If you don’t use up your whole allowance in that year, you can’t carry it over until the next year.

How do I open an ISA?

ISAs are available from lots of different providers, including banks, building societies and investment companies. The type of ISA you choose will depend on what you are saving the money for, and how long you plan to save.

If you want to save money for a house deposit, for example, or you want to save money as a student, then you might want to consider a Cash ISA.

If you are investing for the longer term and don’t need the money soon, you could think about a Stocks & Shares ISA, which invests in the stock market and provides some protection against inflation. There are a number of other types of ISA (see below) which are suitable for different needs.

Who should get an ISA?

Anyone can open an ISA. You can start with a cash investment aged 16 or a stock market investment at 18. If you want to save money from your salary, job or other income source then you can start with small, regular amounts and increase the contributions when you have more disposable income. Or you can open an ISA with a lump sum.

What are the pros and cons of an ISA?

The great advantage of an ISA is that your funds are protected from tax as they grow. You do not pay tax on interest on cash in an ISA or income or capital gains from investments in an ISA.

If you need to complete a tax return for HM Revenue & Customs (HMRC), you do not need to give details of any interest, income or gains that you have made within your ISA.

You do not have to pay any extra charges for keeping your money within an ISA, and you can choose how much you want to contribute to it.

The main drawback is that if you take the money out of your ISA you will need to put it back within the same year, or your allowance will be lost. You cannot carry your allowance forward to the next tax year.

If you invest in an ISA that holds stocks and shares, you might see the value of your holdings fall if the stock market falls. Therefore, you are better using your ISAs as a longer-term investment (five to ten years) if you plan to buy shares or funds in it.

How do I get an ISA?

You can open an ISA with a lump sum payment or by setting up a direct debit arrangement for regular payments with your chosen provider.

How much do I need to open an ISA?

You don’t need to start with a lot – remember that small, regular amounts can grow to quite sizeable sums over time. Generally, you can open a Cash ISA with just £1, while investment companies usually ask for an initial deposit of £25 to start with – although this differs between providers, and some may ask for a minimum of £100.

What do I need to know before opening an ISA?

The main benefit of ISAs is that they are tax-efficient. Over the long term, this can be an advantage, especially if you invest in a Stocks & Shares ISA and the investments grow.

What types of ISAs are available?

Cash ISA

A Cash ISA is just like a normal savings account with a bank or building society. You can choose an instant-access or a fixed-term Cash ISA, and it is open to anyone over 16.

The difference between a Cash ISA and a savings account is that there is a limit of £20,000 for the ISA, but when you earn interest you will not have to pay any tax on it.

Cash ISAs are the least risky option, but interest rates are currently very low. This means that over time, the value of your cash will be eroded in real terms. However, if you are saving for the short term (one to three years) this might be the best place for your money.

Stocks & Shares ISA

You must be 18 or over to invest in a Stocks & Shares ISA, which is basically a tax-efficient wrapper in which you can hold shares, funds, investment trusts and bonds.

This carries a higher risk than cash, because these types of investments can rise and fall as the stock market value changes. For this reason, this type of ISA is better for longer term money.

The advantage of a Stocks & Shares ISA is that you don’t pay any tax on capital gains (the increase in underlying value of your holdings) or income (which is usually in the form of dividends paid by companies to their investors at regular intervals). Over time, that can significantly boost the value of your savings.

It's worth noting that the value of a Stocks & Shares ISA can fall, and you could end up with less than you invested. That’s why a Stocks & Shares ISA is suitable for an investment horizon of five years or more. You can hold cash here for a short period while you decide where to invest it.

Innovative Finance ISA (IFISA)

With this type of ISA, you lend your money to borrowers in return for a fixed amount of interest. These ISAs can offer higher rates of interest than Cash ISAs but there is a reason for this – they are much higher risk and your capital is not protected.

While the returns can look reasonably attractive, the risk is that the borrower could default on their repayments. IFISAs are not covered by the Financial Services Compensation Scheme, so your money could be at risk if the IFISA provider goes bust.

Lifetime ISA (LISA)

The LISA is designed to either help people get on the property ladder or boost their retirement savings.

The government will top up what you invest with an additional 25% bonus. In other words, for every £4 you save, the government will add £1.

You are limited to investing a maximum of £4,000 each tax year. (That amount counts towards your overall £20,000 allowance).

You can invest more than £4,000 but you won’t get the bonus on the extra savings. The top-up is paid up to the age of 50, so that could add up to a maximum bonus of £33,000.

Any UK resident aged between 18 and 39 is eligible to open a LISA. One thing to be aware of: you can use your LISA to buy your first home or you can leave it to grow until you are 60 – but if you withdraw money for any other reason you will lose the 25% bonus.

 

St. James's Place do not offer an IFISA or a LISA.

The value of a Stocks & Shares ISA will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.  

A Stocks & Shares ISA does not provide the security of capital associated with a Cash ISA.

The favourable tax treatment given to ISAs may not be maintained in the future, as they are subject to changes in legislation.

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