ISAs in plain English
Individual Savings Accounts let you save and invest without paying tax on the interest or growth. Here is how the main types work.
By Rainsbridge
1 min read
For information only. This is not financial advice or a personal recommendation.
An Individual Savings Account (ISA) is a tax-efficient wrapper for your savings or investments. Interest, dividends and gains inside an ISA are free of UK income tax and capital gains tax.
The main types
- Cash ISA. Works like a savings account, paying interest.
- Stocks and shares ISA. Holds investments such as funds and shares. Values can go down as well as up.
- Lifetime ISA. For buying a first home or saving for later life, with a government bonus and specific rules and charges on withdrawals.
- Innovative finance ISA. Holds peer-to-peer loans and similar investments, which carry higher risk.
The annual allowance
There is a limit on how much you can put into ISAs each tax year, which runs from 6 April to 5 April. Allowances and rules can change, so always check the current ISA rules on GOV.UK before you invest.
Things to know
- Unused allowance cannot normally be carried forward to the next tax year.
- Moving money between ISAs should be done by transfer, not by withdrawing it, or you could lose the tax benefits.
- Tax treatment depends on your individual circumstances.
