The ISA landscape used to be incredibly simple, but now savers are presented with a range of options when choosing an ISA. At a basic level there are two types of ISAs: Cash or Stocks and Shares. You can put your whole allowance of £20,000 into a Stocks and Shares ISA, a Cash ISA or a combination of these.
Cash ISAs
Cash ISAs are savings accounts that pay interest that is free of income tax. These are provided by most high street banks and building societies. Some cash ISAs are fixed-term savings accounts and there are penalties for withdrawing early. You can only open one Cash ISA per year.
Help to Buy ISA
In the autumn of 2015 the Help to Buy ISA was introduced to help first time buyers save towards the cost of buying their first home. The Help to Buy ISA is a type of cash ISA. Savers can make an initial deposit of £1,000 and then receive £50 for every £200 saved up to a maximum of £12,000. The maximum tax break a saver can receive is £3,000.
Stocks and Shares ISA
The stocks and shares ISA is for individuals looking to invest their money but want to protect any returns from tax. It is a wrapper that can be put around a range of investment products to help save tax. A stocks and shares ISA is generally considered a longer term investment for anything over 5 years. You can only pay into one stocks and shares ISA each tax year.
Sign up for a Moneyfarm Stocks & Shares ISA
Junior ISA
Family and friends can open a Junior ISA for any child under the age of 18 living in the UK. They can put up to £4,080 into the account on behalf of the child. In the same way as the adult ISA savings can be placed in a Cash ISA or a Stocks and Shares ISA or a combination of the two.
Innovative Finance ISA
From 6 April 2016 those that lend to companies will be able to enjoy tax-free interest. This will cover loans arranged through peer-to-peer platforms. Learn more about the Innovative Finance ISA.
The flexible ISA
From April 2016, ISA providers could offer flexible ISAs. This allows you withdraw and replace money from your ISA, provided it is done within the same tax year. Not all ISA providers support this, you should check with your ISA provider that your ISA has this function. This flexibility is currently not available for Junior ISAs or the Help to Buy ISAs.
