The short version: An ISA (Individual Savings Account) is a tax free wrapper for your savings and investments. You can put in up to a set amount each tax year, and everything inside grows without you paying tax on it.
What types are there?
Cash ISAs work like regular savings accounts but the interest is tax free. Stocks and Shares ISAs let you invest in the market without paying tax on dividends or capital gains. Lifetime ISAs help you save for a first home or retirement with a government bonus. There are also Innovative Finance ISAs for peer to peer lending.
How much can you save?
There’s an annual ISA allowance that applies across all ISA types combined. Check gov.uk for the current limit. You can split it between different ISA types or put it all in one.
What’s the tax benefit?
Interest, dividends, and capital gains inside an ISA are all tax free. You don’t even need to declare them on your tax return. Once money is in an ISA, it stays sheltered even as it grows.
Any downsides?
The annual limit means you can’t shelter unlimited amounts. And with Stocks and Shares ISAs, your investments can go down as well as up.
Want to make the most of your ISA allowance? Ask us how it fits into your overall tax planning.
