ISAs Explained 

Whether you’re just starting to save or already have money put away, it always makes sense to have an ISA.

What is an ISA?

ISA stands for Individual Savings Account. It’s a tax-efficient or even tax-free way to get a return on your savings. 

There are four main types of ISA:
Cash ISAs are savings accounts, but the interest is completely tax-free. They can be ideal if you don’t want to put your savings at risk and may need to withdraw money quickly.

Variable Rate Cash ISAs often let you make unlimited withdrawals, but the interest rate may go down as well as up. With a Fixed Rate Cash ISA, you’ll know exactly what interest you’re going to get, but you will need to lock your money away for a set period, usually one to five years.

You can have a Cash ISA if you’re 16 or over and a UK resident. If you are under 16, a parent or guardian will need to open a Junior Cash ISA for you.
Stocks & Shares ISAs let you put your ISA allowance into a range of investments. The value depends on stock market movements, so it can go down as well as up. But if you’re happy taking a higher risk to your capital to potentially get better returns on your savings they may be an option. 

Most people invest in Stocks & Shares ISAs for at least five years to stand a better chance of them performing well. Any returns you achieve are free from both personal income and capital gains tax.

To open a Stocks & Shares ISA you need to be a UK resident aged 18 or over. 
These are for young people aged under 18. There are Junior Cash ISAs and Junior Stocks & Shares ISAs, and you don’t always need a parent or guardian to open one for you. As long as you’re a UK resident aged 16 or 17 you can open a Junior ISA on your own. No withdrawals can be made from a Junior ISA until you are 18.

What happens to your fund when you reach 18 will depend on your provider. If you have a Skipton Junior ISA, we’ll contact you before you turn 18 to ask what you’d like to do. Your options include continuing your investment in an easy-access adult Cash ISA, withdrawing your funds or transferring them to a different ISA. 
Launched in April 2016, the Innovative Finance ISA enables you to lend money through peer to peer lending platforms in a tax-free manner.

The benefit of such an approach is that the interest rates on offer to peer to peer lenders are greater than those currently available from Cash ISA accounts. However, the risk is also considerably higher, as your capital is not guaranteed.

Just like a Cash ISA, through an Innovative ISA there is no tax to pay on the interest you receive, within the £20,000 annual allowance.

Skipton Building Society does not offer Innovative Finance ISAs.

Common questions

We specialise in savings, so we’re always up to speed with the latest rules regarding Cash ISAs and the options available to you. Below are the answers to a few common questions, but we’re happy to talk things through with you if you call into a branch or talk to us on 0345 850 1722.
The maximum amount you’re allowed to pay into ISAs during each tax year (6 April to 5 April) is called an ISA allowance. This year it’s £20,000 for adult ISAs. If you're eligible, you can use up to £4,000 of this in a Lifetime ISA.

The maximum you can pay into a Junior ISA  this tax year is £4,128.

You’re also allowed to leave your previous years’ allowances in your ISAs. So you’ll get the benefit of tax-efficient returns on your full balance, not just that year’s ISA allowance. 
Each tax year, you can put that year’s ISA allowance into a Cash ISA, a Stocks & Shares ISA, an Innovative Finance ISA, a Liftime ISA or a combination of the four. It's up to you how much you put in each, as long as you don't go over the total allowance between the four of them. If you're eligible for a Lifetime ISA, the maximum you can pay into one is £4,000.

When it comes to the next tax year, you may not need to open a new ISA. If you have one from a previous year, you may be able to pay your new allowance into that. 

When you open an ISA, you can switch your funds to another provider during the same tax year, as long as you transfer the balance in full and the account terms and conditions allow it. This is referred to as your current years allowance.

You can even transfer money between Cash ISAs, Stocks & Shares ISAs and Innovative Finance ISAs. You can transfer from one of these into a Lifetime ISA if you are eligible, but the amount transferred will come out of your Lifetime ISA allowance.

When the tax year ends, the funds in your ISA are referred to as previous years’ allowances. If the terms of your account allow it, you can transfer your previous years’ allowances to another provider, and you don’t always have to transfer the balance in full.

If you decide to move funds between ISAs it’s really important that you use your new provider’s official transfer process. If you just withdraw money from your ISA and open a new one it will be viewed as part of that year’s ISA allowance, and may lose its tax-free benefit. However, all of our easy access variable Cash ISAs are Flexible and you will not lose your tax-free benefit if you pay back in before the end of the tax year.

We won Best Cash ISA Provider and Best Savings Provider in the MoneySuperMarket Supers Awards 2016. So if you have any questions, no matter how big or small, you can talk to us.

If you’d like to invest in a Stocks & Shares ISA, your local Skipton Financial Adviser can help you find one that meets your requirements. We’ll explain all the options carefully, and make recommendations from our range of providers. Talk to us and we can make an appointment for you.

Stock market-based investments are not like building society savings accounts as your capital is at risk and you may get back less than you invested. The value of your investments and any income from them may fall as well as rise. The tax treatment of ISAs may be subject to change in the future.

Need help?

Phone Call Skipton Direct: 0345 850 1722

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Flexible ISAs

The government changed the ISA rules in 2016, giving providers the option to make ISAs flexible.

Transfer your ISA

Whether you would like to transfer your current Skipton ISA or an ISA from elsewhere, see our simple guide.

Personal Savings

From 6 April 2016 the Government has introduced the Personal Savings Allowance.

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