ISA guide

What is an ISA?
ISA stands for Individual Savings Account.

There are two types of ISA:
  • Cash ISA – essentially the same as a normal savings account except the interest is tax-free*. There are many types of cash ISA accounts, such as instant access, notice, or fixed rate
  • Stocks & shares ISA – suitable if you can leave your money alone for at least five years. You can put your money into a range of investments, such as unit trusts, open-ended investment companies (similar to unit trusts) and investment trusts, as well as government and corporate bonds. The value of your investment can go down as well as up.

Why should I have an ISA?
With an ISA you don’t have to pay tax* on the interest you earn. If you pay income tax, a cash ISA would probably be the best home for your first £20,000 of savings.

How much can I save in an ISA?
Each tax year, which runs from 6 April to the following 5 April, there is a limit on how much money you can put into an ISA. This is called your ‘ISA allowance’. For the 2018/19 tax year, your ‘ISA allowance’ is £20,000. You can choose how to divide your annual ISA allowance between cash and stocks & shares ISAs, however you choose.

Can I switch my ISA from one provider to another?
You can transfer money that you have saved in previous tax years and from the current tax year into a new ISA without affecting its tax-free status. You can also switch your ISA from one provider to another, whenever you want.

To make a transfer, you must not close one ISA to open another, as this will affect your tax-free status. The transfer has to be arranged directly between the two ISA providers and you must ask your new ISA provider to organise this for you. Your current ISA provider cannot prevent you transferring, but they may charge you if you do switch. It’s worth noting:
  • You can now transfer from a stocks and shares ISA to a cash ISA
  • You must transfer all of the money in your current tax year's ISA, you can’t leave some in the old account
  • You can, if you wish, also transfer some, or all, of the money you put into this ISA in previous years without affecting your current ISA allowance.

How long will it take to transfer my cash ISA?
The transfer of ISAs from one provider to another should be completed within 15 days (or up to 30 days for a transfer of a stocks and shares ISA to cash ISA).

Can I withdraw money from my cash ISA?

You can put money in and take money out of an ISA whenever you wish (if the terms of your account allow), but try not to dip into your ISA savings unless absolutely necessary. This is because you can only put in an annual total of £20,000 into your ISA, and could potentially lose the tax-free status on it.

View our examples

Example 1

You pay in £4,000 on July 1

On September 30, you withdraw £2,000, leaving a balance of £2,000

In December, you decide to replace the money in your ISA

You will only be allowed to pay in £16,000 as you already paid in £4,000 when you first opened the ISA. Paying more than £16,000 would take you over your annual limit

Example 2

You pay in £20,000 on July 1

On September 30, you withdraw £2,000

Even though you now only have a balance of £18,000 in your current ISA, you are not allowed to reinvest the £2,000 as you have already reached your limit for this year

* Interest will be paid free of UK income tax.  The tax treatment of ISAs may change

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