ISAs – An introduction

What is an ISA?

Most normal savings accounts and investments are taxed – so the tax man gets some of your interest, or investment growth (unless you are a non-tax payer).

Individual Savings Accounts (ISAs) are different, because they allow all applicable account holders the ability to earn interest on savings or the capital gains on investments without being taxed.

Types of ISA

There are 2 main types of ISA available;

A Cash ISA can be either

• an account which has a variable rate of interest and normally offers instant access to your funds
• an account which has a fixed rate of interest over a prescribed term with potential penalties for accessing funds early

A Stocks and Shares ISA

• gives you the potential for higher levels of growth than a Cash ISA. This should be considered as a medium to long term investment and is designed to give you a tax-efficient return over years, not months.
• However, please note that the value of stocks and shares and any income from them can fall as well as rise – and you may not get back the full amount of your original investment.

Who can have an ISA?

Cash ISA - anyone who is resident and ordinarily resident in the UK, as well as being 16 or over.

Stocks and Shares ISA – anyone who is resident and ordinarily resident in the UK, as well as being 18 or over

For both types of ISA, a valid National Insurance number is required.

How much can I put in an ISA?

Because of their tax advantages ISAs are subject to annual subscription limits, which sets the maximum that can be saved within the tax year.

During the current tax year (6th April 2009 to 5th April 2010), you can subscribe up to £7,200 in a stocks and shares ISA which can include up to £3,600 in a cash ISA (or £10,200 for customers aged 50 or over by 5th April 2010 in a stocks and shares ISA which can include up to £5,100 in a cash ISA).

From the new tax year, 6th April 2010, there will be new annual subscription limits which will allow all ISA customers to subscribe up to £10,200 a year in a stocks and shares ISA which can include up to £5,100 in a cash ISA.

Whether you like saving in cash, stocks and shares, or a combination of both, there’s an ISA out there for you.

• Common questions

• Have a question about our Instant Access Cash ISA?
• Have a question about our Stocks and Shares ISA?
• Have a general ISA question?