Savings & Investments Part 5: ISAs

Individual Savings Accounts (ISAs) were introduced in April 1999 and replaced Peps and Tessas.

They are a very effective way to minimise the tax you pay on your savings. There is no additional income tax or capital gains tax payable. That means you can draw an income from these products tax free.

How much can I invest?

You can invest up to £11,280 in the current tax year (2012/13).  There are two types of ISA available:

      • Cash ISA.  A cash ISA means you don’t pay tax on the interest credited to your account.  Each tax year you can pay up to half of your total allowance into a cash ISA. That means, currently, you can pay up to £5,640 into a cash ISA.
      • Stocks and shares ISA.  A stocks and shares ISA can invest directly in company shares of your choice but, more commonly, most people would buy a ‘collective investment’. This simply means your money is pooled with many other investors into a single fund managed on your behalf by an investment manager.

You can invest your total allowance of £11,280 into a stocks and shares ISA.

How much can I take out and when?

You can take your money out whenever you need it. And there’s no limit on how much you can withdraw at any time.

However, do bear in mind, that if you’ve invested in a stocks and shares ISA, you could lose money if you withdraw funds at the wrong time.

ISAs can be used to provide income in retirement and do enjoy significant tax benefits with no restrictions on how much you can take out and when.