Individual Savings Accounts (ISAs) are tax-efficient vehicles that allow you to save and invest without having to pay income tax or capital gains tax. They can be a good way for people to start saving or to add to their existing portfolio of savings and investments.
The ISA allowance for the 2019/20 tax year stands at £20,000 of which £4,000 can be saved into a Lifetime ISA for those under the age of 40. You can also open a Junior ISA (JISA) for a child under the age of 18; the JISA allowance for the 2019/20 tax year is £4,368.
ISAs are provided by banks, building societies, asset managers, insurance companies, and the state-owned National Savings & Investments (NS&I). You can invest your entire ISA allowance into cash, stocks and shares, or any combination of the two. Moreover, you can transfer your ISAs between providers as often as they like (subject to your providers’ rules).
Even if you cannot afford to take advantage of the full annual ISA allowance, it is still worth saving what you can via a regular savings plan, which can start from as little as £50 a month. Do not forget one of the golden rules of ISA investing – if you do not use it, you lose it – so make the most of each year’s tax-free ISA allowance. Please note that levels and bases of, and reliefs from, taxation are subject to change.