Making the most of ISAs

Individual Savings Accounts, universally known as ISAs, celebrated their 20th birthday on 6 April 2019. ISAs began life as relatively simple savings plans, but over the years the rules surrounding them have become ever more complex.

A May 2018 report on savings tax from the Office of Tax Simplification (OTS) suggested that “there is scope for a wider full review of the current ISA landscape, to make the regime simpler and more accessible”.

The government’s website says there are only four types of ISA – cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs – but variants exist for specific investment needs.

Despite their proliferation, all ISAs have a number of features in common. For example, they all enjoy tax privileges, a consequence of which is that the amounts that you can invest in each type and in all ISAs are generally subject to annual limits. ISAs may only be run by HM Revenue & Customs (HMRC) approved ISA managers.

This guide explains how the five types work, in order of their original launch date and covers the following areas:

  • The types of ISA available
    The ISA family includes a range of products suited for a variety of investment plans
  • The investment options
    How you can use ISAs for cash savings, stock and shares and more
  • Investment limits
    The amount you can contribute each tax year depends on the type of ISA
  • How ISA investments are taxed
    How the tax privileges work in practice, for each type of ISA

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Making the most of ISAs here

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The value of tax reliefs depends on your individual circumstances. 

Tax laws can change. 

The Financial Conduct Authority does not regulate tax advice. 

The value of your investment can go down as well as up and you may not get back the full amount you invested. 

Past performance is not a reliable indicator of future performance. 

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.