Find out everything you need to know about saving tax free with an ISA.
Whether you are saving for a deposit on your dream house, your wedding, or just saving for a rainy day, an ISA could be what you are looking for.
What is an ISA?
An ISA (Individual Savings Account) is a tax-efficient way to save or invest because money in an ISA is tax free irrespective of the balance of your ISA and how much income tax you pay.
What types of ISA are there?
Cash ISAs allow you to save tax free. They're usually for a shorter period of time than stocks and shares or innovative finance ISAs. They give you instant access to your savings or a fixed rate of interest over a few years. Since the 6 April 2016, they got even better; you now have the freedom to replace any money you withdraw without it counting towards your annual ISA allowance in that year. You'll just need to make sure you replace the money in the same tax year as you withdraw it.
Junior ISAs are a tax-efficient way to save for your child, until they reach 18 years old.
Stocks and shares ISAs
Stocks and shares ISAs are invested in the stock market. They're designed for people who are happy to invest over a long period of time and are looking for potentially higher returns, and accept the risks that come with investing in the stock market.
Innovative finance ISA
This is a new type of ISA where interest is paid on peer to peer loan arrangements and gains from selling such arrangements can qualify for ISA tax advantages.
Help to buy ISA
If you are a first time buyer, you can save up to £200 a month towards your first home with a Help to buy ISA and the government will boost your savings by 25%. That's a £50 bonus for every £200 saved.
But at TSB we like to keep things nice and simple. That's why we only offer cash ISAs and Junior Cash ISAs, which are easy to manage and still let you save tax-free.
Who can apply for an ISA?
You must be a UK resident, and:
- 16 years old or over to apply for a cash ISA, or
- 18 to apply for a stocks and shares or innovative finance ISA, or between 18-40 to apply for a Lifetime ISA
How much can I save tax-free?
The government sets the ISA allowance for each tax year.
The ISA allowance for the 2018/2019 tax year which runs from 6 April 2018 to 5 April 2019 is £20,000 and £4,260 for Junior Cash ISAs.
You can only pay into one cash ISA in each tax year.
What happens if I don't use all my ISA allowance?
ISA allowances can't be carried over from one year to the next.
Since the 6 April 2016 ISAs have been a lot more flexible. This means that you get more freedom to withdraw and replace money from your cash ISA without it counting towards your annual ISA allowance for that year. Any withdrawn money must be replaced in the same tax year as it was withdrawn.
To make the most of your ISA allowance, just make sure that any money you withdraw is replaced in the same tax year.
Choose the TSB cash ISA that's right for you.
TSB offers three different ISAs:
Cash ISA Saver is an instant access account, so you can take your money out whenever you want.
Fixed Rate Cash ISA range gives you a fixed rate of tax-free interest if you're happy to leave your money to grow during your chosen term. Terms are subject to availability.
Junior Cash ISA is a long-term, tax-free savings account for children which matures when they are 18 years old.
TSB does not offer the following:
- Help to buy ISA
- Lifetime ISA
- Stocks and shares ISA
- Innovative finance ISA
- Transfers from a Child Trust Fund (CTF) to a Junior ISA (JISA)
Transferring other cash ISAs to TSB
You can transfer ISAs (except a Lifetime ISA) from other providers to a TSB Cash ISA and Junior ISAs to a TSB Junior Cash ISA, including those from previous tax years, without it affecting your ISA allowance.
We need to do the transfer for you, otherwise you will lose out on your tax-free savings.
What happens to money in a cash ISA if the account holder has passed away?
From 3 December 2014, where a customer who holds an ISA dies, their surviving spouse/civil partner is eligible to invest an additional permitted subscription allowance to an ISA in their own name in addition to their own personal annual allowance.
The additional permitted subscription allowance allows the spouse/civil partner to pay in up to the amount the deceased spouse/civil partner held in their ISA at the date of death (including any interest earned up to that date).
If you are a surviving spouse/civil partner, your ISA provider will need to do the transfer for you, otherwise you will lose out on your tax-free savings.