ISA simply stands for ‘Individual Savings Account.’
There are two are two types of ISA – Cash ISAs and investment ISAs.
A cash ISA is like a normal savings account but offers the following key benefits:
An investment ISA is a tax efficient wrapper for your investments which have certain qualifying criteria. (I.e. You must be at least 18 for an investment ISA and resident and ordinarily resident in the UK for tax purposes.)
If you deposit funds in an investment ISA (also known as a stocks and shares ISA), your money will be invested in the stock market.
Investment ISAs are free from capital gains tax and income tax but the tax credit on dividend income received is not reclaimable. Investment ISAs have the potential to outperform cash savings but you need to be aware that, as these ISAs operate within the stock market, their value at any given time can fluctuate as returns depend on the performance of the underlying investments – so you can lose money as well as make money.
Before moving your money, you may want to consult your financial adviser to identify the best ISA deals and investment plan to suit your needs.
Remember, eligibility for ISAs depends on your individual circumstances, and the rules around them – such as their tax treatment – could change in the future.
All UK nationals have an annual ISA allowance of £10,200.
It’s important to think about your attitude to risk before investing in an investment ISA because the returns are not guaranteed, and you may end up with less money than you originally put in because the value of investments can go down as well as up.