Individual savings account (Isa)

Individual savings accounts (Isas) are a way of saving and investing without paying income tax or capital gains tax.

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 cash or investments. Strictly speaking, you do not buy an Isa, but rather apply for an Isa wrapper and buy the investments that go into it, though many fund management companies do sell them as a package.

The annual allowance has gone up substantially over time. You can now set aside up to £20,000 in the 2018/19 tax year, and you can withdraw the money at any time, unlike a private pension, for example. This annual Isa allowance must be used before the end of each tax year (5 April), otherwise you will lose it.

You can open a cash Isa when you turn 16, but for all other types of Isa you have to be at least 18 years old. You also have to be resident in the UK for tax purposes.

The popularity of the Isa format has encouraged the government in recent years to release various new different types of Isa, most of which confusingly have different rules to the original Isa and arguably should be branded as something else altogether. Junior Isas, for example, are aimed at those who want to save on behalf of a child, but have a far lower annual allowance (currently £4,260 a year) and also ban withdrawals until the child turns 18.

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

Recommended

The best cash Isas on the market now
Cash ISAs

The best cash Isas on the market now

With high inflation, low interest rates, and declining tax benefits, cash Isas are less popular than they were. But don’t dismiss them just yet, says …
29 Jun 2022
The best cash Isas on the market now
Cash ISAs

The best cash Isas on the market now

With high inflation, low interest rates, and declining tax benefits, cash Isas are less popular than they were. But don’t dismiss them just yet, says …
29 Jun 2022
Interest rates are rising, here are the best savings accounts on the market
Savings

Interest rates are rising, here are the best savings accounts on the market

With inflation at more than 9%, your savings are not going to keep pace with the rising cost of living. But you can at least slow the rate at which yo…
24 Jun 2022
Why you should consider abandoning your cash Isa
Cash ISAs

Why you should consider abandoning your cash Isa

Standard savings accounts are paying better rates than their tax-free cash Isa counterparts, says Ruth Jackson-Kirby.
13 Jun 2022

Most Popular

Prepare your portfolio for recession
Investment strategy

Prepare your portfolio for recession

A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, sa…
27 Jun 2022
Market crash: have we hit bottom or is there worse to come?
Stockmarkets

Market crash: have we hit bottom or is there worse to come?

For a little while, markets looked like they were about to embark on a full-on crash. And that could still happen, says Dominic Frisby. Today, he look…
27 Jun 2022
What the end of the 1970s bear market can teach today’s investors
Stockmarkets

What the end of the 1970s bear market can teach today’s investors

The 1970s saw the worst bear market Britain has ever seen, with stocks tumbling 70%. Things have changed a lot since then, says Max King. But there ar…
28 Jun 2022