ISAs - Individual Savings Accounts
Individual Savings Accounts (ISA)
n ISA is a tax wrapper and can be wrapped around either an underlying investment or a pooled investment, and means you pay less or no tax. An example of a tax wrapper is an Individual Savings Account (ISA). An ISA is not a product on its own, but a tax wrapper around a savings or investment product, which protects your money from being taxed.
What can you save or invest in an ISA?
ISAs can be used to:
- save cash in an ISA and the interest will be tax-free
- invest in shares or funds in an ISA - any capital growth will be tax-free and there is no further tax to pay on any dividends you receive
Types of ISAs
There two main types of ISA
- Cash ISA
- Stocks and Shares ISA (also known as Investment ISAs)
A cash ISA acts like a savings account with additional tax protection, while a stocks and shares ISA allows you invest in longer-term investments such as individual shares or bonds, or pooled investments (such as open-ended investment funds, life assurance investments or investment trusts).
ISAs can be used either for capital growth or to generate an income. You can open one of each type of ISA each year, which you can put an overall amount of £11,280, known as your ISA allowance.
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You can invest up to £11,280 in two ways: |
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Put all £11,280 in stocks and shares ISA, or |
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Put up to £5,640 in a cash ISA and up to the balance in a stocks and shares ISA |
These figures apply to the 2012-2013 financial year.
For more information on the best wasy to invest in ISAs please speak with our savings advice team
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