ISA Guide - everything you need to know
What is an ISA?
ISA stands for ‘Individual Savings Account’, which are savings or investment accounts with annual allowances that you don’t pay tax on.
Every tax year (6th April - 5th April the following year), the government sets an ISA allowance and that limits the amount you can save tax-free in an ISA each year.
How do I choose an ISA?
You also need to think about when you need your money - the longer you leave it in your ISA, the better your chance of high returns will be. Tax treatment depends on your individual circumstances and may change.
Stocks and Shares ISA or Innovative Finance ISAs invest your money, these may provide larger returns than other ISA schemes however as with all investments, your money is at risk, and you may get back less than you invest.
Is my money safe in an ISA?
- Cash ISAs and Lifetime ISAs: Yes - your money is protected under FSCS.
- Stocks & shares ISAs and Innovative finance ISAs: Returns are not guaranteed.
- Tax treatment of your investment depends on your personal circumstances and may change in the future.
How much can I save every year in an ISA?
For the tax year 2023/2024, the maximum you can save in an ISA is £20,000 (this is your ISA allowance) and your yearly tax-free allowance doesn’t roll over into the following tax year.
If you have a Lifetime ISA, the maximum you can save each year is £4,000 and the maximum you can save into a Junior ISA every year is £9,000. Money put into a Junior ISA won’t impact your £20,000 allowance, as it’s for your child.
If you accidentally exceed your ISA allowance (on one or across several ISAs), you won't get any tax relief on the excess payments you've made. If this happens, HMRC will contact you at the end of the tax year to let you know the next steps.
Can I open an ISA?
What are the different types of ISA?
There are five different types of ISA:
If you’re interested in Stocks and Shares ISAs, we’ve teamed up with Wealthify you can choose how much to invest and the risk level you’re comfortable with, and Wealthify’s experts will do the rest.
Find out more about the Wealthify Stocks & Shares ISAs.
As with all investments, your capital is at risk and you may get back less than you invest.
What are Cash ISAs?
Cash ISAs are a tax-free way to save. They’re suitable for people who are just starting to save, or people who already have large savings and are currently using a standard savings account.
With TSB’s Cash ISA Saver your money is protected by FSCS up to £85,000 but if you’re shopping around you will want to check each banks’ offering.
If you’re using a standard savings account and you want to move your savings over to an ISA, you may have to pay tax on the interest if you go over your Personal Savings Allowance. The Personal Savings Allowance is currently £1,000 for basic-rate taxpayers, and £500 for higher-rate taxpayers. Additional rate taxpayers don’t get a tax-free allowance. Tax treatment depends on your individual circumstances and may change.
The benefits our Cash ISAs:
- Interest earned doesn’t count towards your Personal Savings Allowance, depending on your circumstances.
- Savings up to £85,000 per person are protected under the Financial Services Compensation Scheme.
What types of cash ISAs are there?
- Notice Cash ISAs: You’ll need to give a few days’ notice to withdraw your money - these ISAs work best if you don’t need immediate access to your savings.
- Fixed Rate Cash ISAs: These ISAs tend to offer higher interest rates but if you do withdraw cash, withdrawal charges may apply.
- Help to Buy ISAs: These are no longer available. They were created to help first-time buyers afford to own their own property. The government topped up savings with a 25% bonus, up to £3,000.
- Lifetime Cash ISA
What are Stocks and Shares ISAs?
Benefits of Stocks and Shares ISAs:
- You’re exempt from Capital Gains Tax.
- You don’t pay tax on share dividends, or any interest earned.
Wealthify is as an easy way to get started as they take the hard work out of investing - you can start investing as little as £1 and even opt for ethical investments.
What are Innovative Finance ISAs?
Innovative Finance ISAs are essentially peer-to-peer lending - you earn tax-free interest by lending money to individuals or businesses. Like Stocks and Shares ISAs, these products come with limitations and risk, they are also not regulated and not protected by FSCS so your capital may be at risk.
Benefits of Innovative Finance ISAs:
- You can invest in local businesses which matter to you, and help your community
Some of the risks of Innovative Finance ISAs:
- It can take a while for you to get your money back - IFISAs may not be suitable for you if you’ll need to access your money in a hurry.
What are lifetime ISAs?
Lifetime ISAs are savings schemes to help people saving for their first home or retirement. You can put in up to £4,000 each year, and the government will top it up with a 25% bonus, up to £1,000 per year.
- Buying your first home (the property must cost £450,000 or less and you must have a mortgage)
- You’re 60 or over.
- You’re terminally ill, with less than 12 months to live.
Some of the benefits of lifetime ISAs
- The government provides a yearly 25% bonus on however much you save, up to £1,000 per year.
- You can hold Cash or Stocks and Shares Lifetime ISAs, or a combination of both
- If you’re buying a home with someone else and you’re both first time buyers, they can also open a Lifetime ISA and claim the government 25% bonus.
Can I get a Help to Buy ISA?
The Help to Buy ISA scheme has ended, but you can take a look at our ISA offerings which can be a great way to kick-start savings for a house deposit.
What are Junior ISAs?
Junior ISAs let you save, tax-free, on behalf of a child as long as you’re the parent/guardian.
What are the benefits of getting a Junior ISA?
- If you get a Junior Cash ISA (JISA), their savings are protected (this is not the case with a Stocks & Shares JISA)
- The money you save in a Junior ISA doesn’t impact your own £20,000 ISA allowance.
Did Junior ISAs replace Child Trust Funds?
Child Trust Funds were a long-term tax-free savings account for children born between September 2002 and January 2011 - the scheme closed in 2011.If the child you’re looking to save for was born after January 2011 you can open a Junior ISAs in their name if you’re a parent or guardian.
Can I move my ISA to a new provider?
- If you are thinking of switching ISA providers, speak to your new provider or bank and they’ll sort the process out to make sure you don’t lose any benefits.
- You can also bring together your ISAs from different providers or tax years into one new ISA.
- If you’re switching to TSB, get in touch with us so we can arrange the transfer, and make sure you don’t lose out on any tax-free interest. It can take up to 30 days to transfer, but we aim to do it in just seven.
Fill in our transfer form.
Transferring most ISAs only takes a few minutes.
Why not do it now?
We’ll talk to your provider.
We’ll get your provider to transfer your ISA over to us.
Just check to see if they have any charges or a notice period.
Wait 15 days.
You can transfer cash ISAs in 15 days. Or less.
Stocks and shares ISAs might take a little longer. Up to 30 days.
Earn tax-free interest.
Get interest at the new rate from the day we get your completed transfer form. As long as your funds are free to move.
- You can switch between Cash ISAs, Stocks and Shares ISAs, and Innovative Finance ISAs if your priorities change, but beware of fees and interest penalties - these are most common on Fixed Cash ISAs, Stocks and Shares ISAs and Innovative Finance ISAs.
Can I withdraw the money in my ISA?
- Cash ISAs: If they’re easy access, you can take money out whenever you like. If they’re fixed, you can access your money, but you may pay an interest penalty.
- Stocks and Shares ISAs: You’ll need to sell funds, bonds or shares to withdraw your cash - this can take a few days.
- Innovative Finance ISAs: It may be trickier to get your cash back, as you’ll need to sell your investments.
- Junior ISAs: Any money invested is locked away until the child you’re saving for turns 18.
Is there anything else we can help with?
We’ve told you about all the ISAs out there – even the ones we don’t do so that you can choose the right one for you.
Find out more about our ISAs. You can apply online anytime or book a video appointment to speak to one of our Money Confidence Experts.