What is an ISA savings Account?

What is an ISA savings Account?

What is an ISA? An introduction to the idea of an ISA Savings Plan. What they are the limits on the amounts you can save in them.

ISA’s are a type of saving account in the UK. They are Individual Savings Accounts hence the term ISA. ISA’s where introduced in Gordon Brown’s first budget as chancellor in 1997. The ISA savings account replaced the TESSA and PEP accounts that had been established by the previous Conservative governments.

In an ISA savings account you can save up to £7,200 a year and not pay UK tax on the income that you receive from your savings fund. An ISA can be a combination of cash, stocks and shares and insurance policies. A UK based individual can invest in two ISA in the same tax year if they are spilt between one containing cash and another containing stocks and shares. The tax year in the UK runs 6th April one year to 5th April the following year.The limit to the amount of cash you can invest in an ISA in any tax year is £3,600. You can only have a single cash ISA a year with one provider. The limit to the amount of stocks and shares you can invest in an ISA in a single tax year is £7,200. Once again you can only have one ISA with one provider per tax year.

You can invest in both cash and shares but the total amount of the ISA Saving Plan must not exceed the total of £7,200. The different schemes, one cash and one share can be with different investment services providers. The important point to remember is that you cannot exceed the total of £7,200 for the joint investment and not exceed £3,600 in cash.

An ISA savings plan allows you to transfer your cash ISA to another ISA manager or Investment Services provider, either into another cash ISA or into a stocks and shares ISA. You can transfer your stocks and shares ISA to another ISA manager, but only into another stocks and shares ISA. You cannot transfer a stocks and shares ISA into a cash ISA. You are able to transfer some or all of the money saved in previous tax years without affecting your annual ISA investment allowance.

ISA are a good way of investing capital without paying tax on the savings.

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