ISAs
ISAs


Written by Jennifer Stevenson
21st March 2019

How much can I pay into an ISA?

Each tax year, there’s a limit set by the government to the amount you can save and invest in ISAs:  your “annual ISA allowance”.

The tax-free allowances for ISAs are intended to reward savers and encourage us to invest more to support our future retirements, without creating a tax haven that can be taken advantage of by very wealthy individuals who just want to avoid paying tax.

The allowance for the current tax year is £20,000, which you can invest in any combination of permitted ISAs up to midnight on Friday 5 April 2019.

How much can I put into in which ISAs?

Up to 2014 there were restrictions on how much you could put into a cash ISA (less than half your annual allowance).

But the current government is very pro-ISA, so there are many more products and much more flexibility now.

  • There’s no longer a restriction on the amount you can put into a cash ISA.
  • You can spread your annual allowance across multiple products: a cash ISA, stocks and shares ISA, and an innovative finance ISA. But you can only open one of each type, each year. (See below for which category the different types of ISAs fall into, and any limits on how much you can pay in.)
  • Existing ISAs that you opened in previous years remain invested and can continue to grow. But compare the rates on them with newer products, and if necessary transfer poorly-performing savings and investments into new ISAs that offer better interest rates.
  • Transfers in from previous years’ ISAs don’t count as part of your ISA allowance for this year.
  • You can transfer your investment from a previous ISA into any kind of ISA – it doesn’t need to be the same type of ISA.

For example…

If you opened a previous investment ISA that you’re paying (say) £50 into each month, you can continue to do that, and your contributions will be subtracted from your current annual allowance. But you can’t pay into both a previous investment ISA and a current one.

Cash ISAs

A Cash ISA is simply a savings account you never pay tax on. You can open a new cash ISA each year, if you want. Useful for an amount of money you want to be secure while it’s earning a bit of money, and have easy access to, but if you don’t want it tied up for too long.

Compare cash ISAs

You may also want to consider Structured Deposit Plans, which are a type of Cash ISA for lump-sum savings, which offer attractive returns linked to FTSE100 performance, with your capital guaranteed.

Compare Structured Deposit Plans

Cash ISA restrictions:
  • If you already have a cash ISA you opened a previous year you can open a new one this year, but only ONE cash ISA a year.
  • UNLESS the second (or third) cash ISA account you want to open in the same year is with the same provider

For example…

If you’ve already opened a 30-day Notice cash ISA with Aldermore, but now you’d like to open Aldermore’s 2-year cash ISA as well, to take advantage of the higher rate for another portion of your cash.

  • Or if a new provider comes into the market offering more favourable terms, you can transfer over the cash you’ve already paid into another cash ISA, and close the previous account.
  • Be careful to transfer ISA holdings – don’t just withdraw everything from the account and then close it: taking it out of the “ISA wrapper” means you lose the tax benefits.

Stocks and Shares ISAs / Investment ISAs

These are two names for the same type of ISA. They’re not always invested in stocks and shares – your money could be invested in funds (which you by “units” of) or shares, or corporate and government bonds.

  • They are investments (not savings, like Cash ISAs).
  • Your capital is at risk, and some of them are not covered under the Financial Services Compensation Scheme (FSCS).
  • But the potential returns are much higher, which is why many people like to have a mix of low and higher-risks ISAs.

Compare Stocks and Shares ISAs

They include Structured Investment Plans – which are also not capital protected, and not covered under the FSCS, but which offer potentially high returns:

Compare Structured Investment Plans

Innovative Finance ISAs (IFISAs)

These were introduced by the government in 2016 to allow people to invest in the growing “peer-to-peer” lending market, cutting out intermediaries and offer much higher rates of return, but at higher risk.

This is an investment ISA. So you can’t open one of these as well as an Investment ISA, (or “Stocks and Shares” ISA).

Compare Innovative Finance ISAs

Help to Buy ISA

These were introduced at the end of 2015 to help first-time buyers saving for a home. You could put in a maximum of £3,400 in the first year, with £200 a month thereafter, all of it being topped up by the government by 25% up to a maximum of £12,000 in savings gaining £3,000 in government top-up.

  • This is a type of Cash ISA, so you can’t open a Help to Buy and a Cash ISA in the same year.
  • You can transfer the amount you have in a previous Cash ISA into your new Help to Buy ISA to help kickstart it (subject to the limits).
  • Some providers will allow you to save into both within the same ISA wrapper, subject to the Help to Buy ISA savings limits and government contribution, and your overall ISA allowance.
  • You can only open a Help to Buy ISA up to 30 November 2019. You can keep saving into it after that date and you need to claim your bonus contributions by December 2030. are only available to

Lifetime ISA

These were introduced in April 201y and have largely replaced Help to Buy ISAs – people aged 18-40 can use them to save for their first home, or for retirement.

  • The government will give you a bonus of 25% of what you pay in, up to a maximum of £4,000 a year
  • There is one of these ISAs available which is a type of cash ISA (“cash LISA”), and the rest are investment LISA’s.
  • So, again, you can only open one of each type a year.

Q: If I don’t use my whole allowance this year, can I add it onto next year’s allowance?

No. This is a use-it-or-lose-it allowance each year.

Q: What is the ISA allowance for next year?

  • The individual ISA allowance for 2019-2020 stays the same as this year, at £20,000.
  • The allowance for Junior ISAs icreases slightly next year, in line with inflation: from £4,260 to £4,368.