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What is an ISA?

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If you’re interested in an ISA, this is a good place to find out more. We’ve 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 a brighter future.

What is an ISA and how does it work?

Put simply, an ISA, or Individual Savings Account, is a type of savings account that lets you save some of your money tax-efficiently. ISAs are a little different to other savings accounts, as there’s a limit on how much you can save each year, but the interest you earn is free from income tax.

Each person has an annual ISA allowance that they can save tax-efficiently in one or more types of ISA. The ISA allowance for this tax year is £20,000.

If you’re looking to make the most of your savings by keeping more of the interest you earn, an ISA could be right for you.

What are the different types of ISA?

There are five types of ISA:

  • Cash ISA
  • Stocks and Shares ISA
  • Lifetime ISA
  • Innovative Finance ISA
  • Junior ISA.

We offer Cash ISAs, a Junior Cash ISA and a Cash Lifetime ISA. We also offer financial advice on investing in Stocks and Shares ISAs. It’s up to you to decide which is the best ISA for you, but here’s a little information on each to help you get started.

Cash ISAs

Cash ISAs work just the same as a traditional savings account, however you don't pay tax on the interest you earn. There are different types of Cash ISA, with our most straightforward ones being our Easy Access Cash ISAs - they pay a variable rate of interest and you can access your money as often as you need to. These accounts tend to be more suited to savers with short term goals or who need access to their savings.

Some Cash ISAs are flexible, like our Easy Access Cash ISAs, which means you can withdraw 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. 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.

Another type of Cash ISA is a fixed rate Cash ISA. These tend to be suited for longer term savers, as you can generally receive a higher, fixed rate of interest in exchange for locking your money away for a fixed period. They could be ideal for savers 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.

Easy Access Cash ISAs

Fixed Rate Cash ISAs

Lifetime ISA

A Lifetime ISA (LISA) is available to people between the ages of 18-39 to help them save to buy their first home or towards their retirement 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).

Any withdrawals within the first 12 months of your first payment into a LISA will incur a 25% government withdrawal charge, which would mean you would get back less than you paid in. 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).

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.

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 money is at risk and you may get back less than you invested. The tax treatment of investments depends on your personal circumstances. Tax rules may change in the future.

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

Stock and Shares ISAs

Junior ISAs

A Junior ISA is an ISA for young people under the age of 18. The annual Junior ISA allowance for this 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, but the money in the account can only be withdrawn by the child, once they have turned 18. It can be a good way to build up some savings from an early age.

Junior Cash ISA

What are the benefits of having an ISA?

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

  • A Cash 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 savings aren't held in a Cash 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 and paying tax on your savings if that money isn't in a Cash ISA.
  • If you’re an additional-rate taxpayer you’re not eligible for a PSA, but you can still earn interest on your savings tax-free with a Cash ISA.

Tax rules may change in the future, for more information visit the Tax on savings interest page on

Know your ISA

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