Individual Savings Accounts (ISAS)

Posted on: 06 Jan, 21

Individual Savings Accounts (ISAs) have been available since 1999. The proceeds are shielded from Income Tax, tax on dividends and Capital Gains Tax.

If you have cash savings or are investing, there is no reason not to use an ISA taxefficient wrapper. The end of the 2020/21 tax year is Monday 5 April 2021, meaning that if you’re planning to use this year’s ISA allowance you need to act fast. There’s no rollover from one tax year to the next. We’ve answered some typical questions we get asked about how best to use the ISA allowance to help make the most of the opportunities as this tax year draws to a close.

Q: What is an Individual Savings Account (ISA)?

A: An ISA is a ‘tax-efficient wrapper’ designed to go around an investment. Types of ISA include a Cash ISA and Stocks & Shares ISA. A Cash ISA is like a normal deposit account, except that you pay no tax on the interest you earn. Stock & Shares ISAs allow you to invest in equities, bonds or commercial property without paying personal tax on your proceeds.

Q: Can I have more than one ISA?

A: You have a total tax-efficient allowance of £20,000 for this tax year. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, or any combination of the three) cannot exceed £20,000. However, it’s important to bear in mind that you have the flexibility to split your tax-free allowance across as many ISAs and ISA types as you wish. For example, you may invest £10,000 in a Stocks & Shares ISA and the remaining £10,000 in a Cash ISA. This is a useful option for those who want to use their investment for different purposes and over varying periods of time...

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