ISAs explained

ISAs explained

Find out about the different ISA types and how they can help you save tax-free.

What is an ISA?

Put simply, an ISA, or Individual Savings Account, is a type of savings account that lets you save some of your money tax-efficiently.

There are five types of ISA: Cash, Stocks and Shares, Lifetime, Innovative Finance and Junior. We offer Cash ISAs, a Junior Cash ISA and a Cash Lifetime ISA, and we also offer financial advice on investing in Stocks and Shares ISAs. Each person has an annual allowance that they can save tax-efficiently in one or more types of ISA. The ISA allowance for the 2020/21 tax year is £20,000.

If you’re interested in an ISA, you’ve come to a good place to find out more. For a start, Skipton Building Society has been helping people save with ISAs since they were first introduced back in 1999. And now, we’re an award-winning savings provider, helping customers save for their future in a way that suits their needs.

The different types of ISAs, explained

Cash ISAs

If you’re looking to save tax-free, we’ve got different types of Cash ISA to suit your needs. These are:

Fixed rate Cash ISAs

With our fixed rate Cash ISAs, you agree to ‘lock your money away’ for a fixed period, usually in exchange for higher rates of interest. They could be ideal for savers who who have a lump sum to pay in and don’t need access to their money before the end of the term as they’re saving for the future.

Find out more about our fixed rate Cash ISAs.

Easy access Cash ISAs

With our easy access Cash ISAs, you can access your money as often as you need to. These accounts are more suited to savers with short term goals or who need access to their savings. Many of our easy access ISAs are flexible, which means you can withdraw your money and replace it later on without it affecting your annual allowance, as long as it's done in the same tax year and the account remains open.

Find out more about our easy access Cash ISAs.

Lifetime ISA

We were the very first provider to offer the Cash Lifetime ISA. The purpose of a Lifetime ISA (LISA) mirrors our own purpose: to help people save for the future and own their own home.

A LISA is available to people between the ages of 18-39 and offers them the chance to save up to £4,000 a year tax free until the age of 50. On top of that, the government will give you a bonus worth 25% of your contributions (up to £1,000 a year).

The annual allowance for a Lifetime ISA forms part of your overall annual ISA allowance. So if you used your full £4,000 Lifetime ISA annual allowance, you would then be able to pay up to a total of £16,000 into other types of ISA during the tax year.

Any withdrawals within the first 12 months of your first payment into a LISA will incur a 25% government withdrawal charge, even if the withdrawal is to buy your first home, which would mean you would get back less than you paid in. Please note between 6 March 2020 and 5 April 2021 the government withdrawal charge is 20%. After 12 months of making your first payment, you can withdraw money to buy your first home without paying the government withdrawal charge, but if you withdraw for any other reason than that before you reach 60, the government withdrawal charge will apply (unless you're diagnosed with a terminal illness).

Find out more about our Online Cash Lifetime ISA.

Stocks and Shares ISAs

Stocks and Shares ISAs offer a way of investing tax-efficiently and could help your money go further and help you reach your longer term financial goals. They could be ideal for people that are wanting to save for the long term - you'd need to be able to commit your money for at least five years. Stocks and Shares ISAs aren’t like bank and building society savings accounts as your capital is at risk and you may get back less than you invested.

If you’re interested in investing in a Stocks & Shares ISA, you should talk to one of our expert financial advisers, they could help you find a solution that suits your circumstances and attitude to risk.

If you’d like to get an idea of the potential of investing, try our Investment Calculator today.

Junior ISAs

A Junior ISA is an ISA for young people under the age of 18. The annual Junior ISA allowance for the 2020/21 tax year is £9,000. With our Junior Cash ISA, when the child turns 18, the Junior ISA reaches maturity and the money held in it transfers into an easy access Cash ISA for adults. It can be set up by a parent or guardian, or the young person themselves after they turn 16.

It can be a good way to build up some savings from an early age.

Find out more about our Junior Cash ISA.

ISA rules explained

We know that you may have lots of questions about how an ISA works and how to make the most of your allowance. So, to help, we’ve put together some quick-fire pointers:

How many ISAs can I have?

You can have as many ISAs as you like, as long as you meet the eligibility criteria. However, you can only pay into one of each type of ISA in a single tax year (e.g one Cash, one Lifetime, one Stocks and Shares etc) and you can’t pay in more than your annual ISA allowance overall.

How does the ISA allowance work?

Your annual ISA allowance is £20,000 for the 2020/21 tax year and you can split that between different types of ISA. For instance, if you paid £4,000 into your LISA (the maximum you can save each year in a LISA), £10,000 into a Cash ISA and £6,000 into a Stocks and Shares ISA, that would make up your full allowance. Tax rules may change in future.

When does my allowance renew?

Your allowance renews on 6 April at the start of each new tax year.

Can I transfer money from one ISA to another?

If you’re looking to transfer your savings into a Skipton ISA, take a look at our transfers page for more details.

What is a flexible ISA?

With a flexible ISA, you can withdraw and replace your money without affecting your tax free allowance. You just have to make sure your payments are put back into the same account and in the same tax year as the withdrawal. For example, if you have already paid £10,000 into your ISA during the current tax year, you can withdraw £5,000 and still pay in another £15,000 before you reach your annual £20,000 limit.

If your ISA isn’t flexible, you can only deposit £20,000 in total during the course of the tax year, no matter how much you take out.

You can find out more about flexible ISAs here.

Can I inherit an ISA?

If your spouse or civil partner died on or after 3 December 2014, you can inherit their ISA allowance to increase the amount you can save in ISAs. Even if they left the money in their ISA to someone else, you can still inherit this additional allowance to earn tax free interest on money you might have from elsewhere. It’ll transfer to you as an Additional Permitted Subscription (APS) allowance and can help your money go further by increasing the amount of interest you can earn tax-free.

If the date of death is on or before 5 April 2018, the APS allowance amounts to the value they held in ISAs when they died. If they died on or after 6 April 2018 it can be the balance either at the date of death or when it ceases to be a continuing ISA.

Find our more about Additional Permitted Subscriptions here.

What are the benefits of having an ISA?

When the government introduced the Personal Savings Allowance (PSA) in 2016, it raised the question – are ISAs still worthwhile? The answer to that really depends on your personal circumstances, here's some points that might help you decide:

  • An ISA offers a tax-efficient way of saving because you don’t pay any income tax on the interest you earn, regardless of how much you’ve saved in ISAs over the years. But if your money isn’t held in an ISA and you exceed your PSA, you’ll pay tax.
  • Your ISA allowance can be passed on to your spouse or civil partner after you die as an additional tax-free allowance.
  • Interest rate increases or having more money to save at a later date could leave you vulnerable to exceeding your annual PSA.
  • If you’re an additional-rate taxpayer and not eligible for a PSA, you can still earn interest on your savings tax-free with an ISA.

Tax rules may change in future, see the HMRC Guidance on PSA for more information.


Personal savings allowance 2020/21 - How much can I save before interest is taxed?

Basic rate tax payer Higher rate tax payer
Personal Savings Allowance £1,000 £500
Amount Saved (Assumed Interest rate 0.75%) £133,333 £66,666

If you are an additional rate tax payer, you are not eligible for a PSA.


Choose your ISA

We have plenty of ISA options to choose from within our range.

Find your ISA

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