Overview: What is an Isa?

Your savings options sorted

1. Everyone resident in UK and over the age of 16 can save up to an annual limit into an Individual Savings Account (Isa). Once inside the Isa, the money is protected from tax on any further income or gain in value.

2. This tax year (which runs from 6 April 2018 to 5 April 2019) you can put away up to £20,000. You can put the full whack into one of the different Isa types or spread it between them.

3. The most common are the Cash Isa, namely a bank or building society savings account, and the Stocks and Shares Isa, which invests in the stock market. You need to be over 18 to get a stocks and shares Isa and you’ll have to pay a small fee for investment services. 

4. Saving to buy your first house? The government will give you a 25% boost (capped at £3,000) if you save into a Help to Buy Isa. The property must cost less than £450,000 in London or £250,000 outside London. Warning klaxon: consumers have had problems accessing the bonus, see here for more details. 

5. You could earn more than 5% on your money with an Innovative Finance Isa. This gives tax savings on peer-to-peer lending, where small companies borrow your money directly, cutting out middlemen like banks. The catch is that these firms are mainly start-ups and return of your money is not guaranteed.

6. The Lifetime Isa is for savers aged between 18 and 40 will get a 25% boost to their savings, up to a limit of £4,000 a year, provided they use the money to buy their first house or to retire after 60.

7. Children under 18 also get an annual allowance - £4,260 this tax year – to save into a Junior Isa. This has the same benefits as the adult variety. Anyone can contribute but remember the money is locked away until it transfers to the child when they reach 18. See here for our SMM guide to saving for kids.

8. If your Isa is 'flexible', you can take out and replace money without it counting towards your annual allowance provided you do so in the same tax year. However, not all companies provide flexible Isas and you may pay for that easy access with reduced returns.

9. It’s easy to transfer money between your Isas and also to swop providers. For stocks and shares Isas, there may be a small charge. Ask your new provider for a transfer form, fill it in and they handle the rest. Don’t skip the official procedure and withdraw the money – you will lose the tax benefits.

10. Isas are available from most banks, building societies and stock brokers. Most can be run online (and grouped together as a portfolio) via ‘platform’ services from firms such as Hargreaves Lansdown, Fidelity and Bestinvest.

 

More stuff:

  • For a detailed beginners’ guide to Isas, see here.
  • The official guide to Help to Buy is here.
  • Everything you need to know about the Lifetime Isa can be found here.

 

Last updated 15 September 2017.