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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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.

Advertisement
Advertisement - Article continues below
Advertisement

Recommended

Visit/513293/the-benefits-of-sitting-tight-with-your-savings
Personal finance

The benefits of sitting tight with your savings

Agreeing to lock up your cash can boost the interest rate on your savings significantly. Ruth Jackson-Kirby reports.
20 Aug 2019
Visit/519193/mini-bonds-big-trouble
Personal finance

Mini-bonds could spell big trouble for small investors

Investors have been seduced by the high interest rates on mini-bonds, but they’re not as safe as they seem.
11 Dec 2019
Visit/518407/gifts-that-keep-on-giving
Personal finance

Don’t give your children toys for Xmas, give money

If you give your children or grandchildren fashionable toys for Christmas they’ll soon forget about them – so put some money to work for them instead.
26 Nov 2019
Visit/517999/beware-of-cash-isa-scams
Personal finance

Beware of cash Isa scams

Fraudsters have been targeting savers by offering unrealistically high interest rates on cash Isas.
19 Nov 2019

Most Popular

Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/economy/uk-economy/601063/the-uks-bailout-of-the-self-employed-comes-with-a-hidden-catch
UK Economy

The UK’s bailout of the self employed comes with a hidden catch

The chancellor’s £6.5bn bailout of the self employed is welcome. But it has hidden benefits for the taxman, says Merryn Somerset Webb.
27 Mar 2020
Visit/economy/uk-economy/601055/debt-jubilee-will-our-debts-be-written-off
UK Economy

Debt jubilee: will our debts be written off?

The idea of a "debt jubilee" – general society-wide cancellation of debt – goes back to Biblical times. Could it happen again? And would it really do …
28 Mar 2020
Visit/personal-finance/mortgages/601045/coronavirus-what-it-means-for-your-mortgage-or-your-rent
Mortgages

Coronavirus: what it means for your mortgage or your rent

Ruth Jackson-Kirby looks at all the key questions for owners, renters and landlords affected by the coronavirus crisis.
29 Mar 2020