Individual savings account (Isa)

Individual savings accounts (Isas) are a way of saving and investing without paying income tax or capital gains tax. An Isa is not an investment in itself, but a ‘wrapper’ into which you can put investments. Strictly you do not buy an Isa, but rather an Isa wrapper and an investment, though many fund management companies do sell them as a package.

You can split your £11,520 annual Isa allowance between cash and equities. The limit is based on contributions, so you can’t put in £11,520 at the start of the year, take out £3,000, then top it up again, as you have already used your limit up.

Finally, there are two types of Isa – a stocks and shares Isa permits you to invest the full £11,520 in shares, while a cash Isa only lets you invest up to £5,760 in cash.

• See Tim Bennett’s video tutorial: Why you need an Isa.

Merryn

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