Individual Savings Account (ISA)

ISAs represent a tax-efficient container into which to place cash savings and investments in equities, bonds and collectives.

Introduced in 1999 as a replacement for PEPs and TESSAs, an ISA is available to all UK resident individuals over the age of 16 for cash ISAs & over the age of 18 for stocks and shares ISAs. Designed to encourage new saving they are attractive to investors seeking a tax-efficient investment vehicle with the potential for higher returns. There is usually a low level of minimum subscription and no minimum period of investment.

An ISA enables you to accumulate savings in a tax efficient manner as all gains are free from tax, making them particularly attractive to higher rate taxpayers.

An ISA can contain cash deposits, investments in equities, bonds and collectives. Currently, the maximum subscription into ISAs is £11,280 in any one tax year. An individual can invest in two separate ISAs covering Cash, (maximum £5,640), and Stocks and Shares, (maximum £11,280 less what has been invested in cash). For UK equities, you are deemed to pay 10% dividend tax credit in stocks and shares ISAs which cannot be claimed back.

Withdrawals from an ISA can be made at any time without loss of tax relief but it is only possible to hold one ISA per tax year, so if an ISA is closed within the same tax year that it was opened, another one cannot be started until the next tax year.

Equity investments do not include the same security of capital which is afforded with a deposit account.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.

The value of investments and the income from them may go down. you may not get back the original amount invested.