ISAs (Individual Savings Accounts) allow you to earn interest on your savings or investments tax-free. The amount you can put into your ISA is capped for each tax year, for 2018/19 and 2019/20 it’s £20,000. You can choose to split your ISA allowance across different ISAs,.
You can choose from a Cash ISA, Stocks & Shares ISA, Innovative Finance ISA (IFISA), Lifetime ISA (LISA) and Help to Buy ISA. There’s also a Junior ISA to help you save for the kids.
- Cash ISA - a Cash ISA works like a savings account, only all the interest you earn is tax-free.
- Stocks & Shares ISA - you can also use an ISA to earn tax-free interest on investments.
- Innovative Finance ISA - allows you to earn tax-free interest by lending to people or businesses.
- Help to buy ISA - a type of Cash ISA made for first-time house buyers. You can save £1,200 in the first month, then £200 per month from then on. When you’re ready to buy your property, the Government will then add 25% as a bonus (up to £3,000). As they are a type of Cash ISA, you can’t pay into both a Cash ISA and a Help to buy ISA in the same tax year. If you’ve opened your Cash ISA this year, you can transfer the funds to your Help to buy ISA. If you have more than £1,200 in there, you can transfer the rest elsewhere.
- Lifetime ISA - like the Help to buy ISA, a Lifetime ISA can help you at important life stages. It can also help you buy your first home, or you can keep it open and use it for retirement.
- Junior ISA - if your child is under 16, you can open a Junior ISA (JISA) for them instead. They only get an allowance of £4,260 at the moment. You have a choice of Cash or Stocks & Shares, and you can divide the allowance between the two.
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