ISA Allowances and Rules
Individual Savings Accounts or ISAs as they are commonly called were launched in 1999 as a successor to the Personal Equity Plan or PEP. The original thinking behind the PEP launched in 1987 by Nigel Lawson was to encourage more people to invest in the stockmarket. With the total ISA market in the UK valued at £350 billion split between cash and stocks and shares ISAs at the end of April 2010 and with 42% of UK households holding an ISA (Source: TISA) it cannot be said that ISAs and PEPs have not been anything but a success story in encouraging people to save.
All ISA Managers must be authorised and regulated by the Financial Services Authority before HMRC will approve them as a ISA manager. See below for current ISA allowances and rules.
Types of ISA |
ISA Allowances |
ISA Rules |
Cash ISAs |
2011/12 - £5,340 per individual
2012/13 - £5,640 per individual |
Must be 16 and a UK resident or Crown employee.
Transfers in from other Cash ISAs from previous years permitted.
You can save in 2 separate ISAs in any one tax year e.g.1 Cash ISA and 1 stocks and shares ISA. You cannot save in more than one cash ISA |
Stocks and Shares ISAs |
2011/12 - £10,680 per individual
2012/13 - £11,280 per individual |
Must be 18 and a UK resident or Crown employee.
Transfers in from Cash or Stocks and Shares ISAs from previous years permitted. |
Junior ISAs |
£3,600 per annum per child |
Must be under 18 and live in the UK. Must not already hold a Childrens Trust Fund (CTF) account.
The child can have both a junior cash ISA and a Junior stocks and Shares ISA as long as total amount invested in the tax year is no more than £3,600. If child is under 16 someone with parental responsibility must open the Junior ISA (registered contact). |
Benefits of an ISA
There is a wide range of savings account deals to choose from so we have highlighted some of the benefits:
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Income Tax – If you are a taxpayer no further tax is payable on income received from ISA savings interest or investment income. In a stocks and shares ISA any dividend income received within the ISA will be subject to a 10% tax credit – this is not income tax and is not repayable.
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Capital Gains Tax – No tax is payable arising on any gains within a stocks and shares ISA
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Tax Return – No need to declare your ISA on a personal tax return
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Access – Money can be withdrawn from an ISA at any time
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Transfer – You can transfer your ISA to another ISA provider to benefit from higher interest rates (cash ISA) or potential better investment performance (stocks and shares ISA) or lower charges.
With interest rates at the time of writing at an all-time low the impact in real terms of inflation on your money is not to be underestimated in eroding the buying power of your hard earned cash. For latest 2012 ISAs use our cash isas rates tables to ensure you get a good savings rate.