Keep your money from the taxman by saving in an ISA. You can invest up to £20,000.
Some accounts also allow you to transfer in money invested in the previous tax year so you can maximise returns on all your tax-free savings.
Move your Cash ISA to a new ISA with a different provider (to get a better interest rate) without using up your tax-free savings allowance
From paying in and receiving your bonus to withdrawing funds if you need to, here are the basics about ISA.
An ISA (Individual Savings Account) is a type of savings account that you never pay tax on as Interest from an ISA is tax free. You can save up to a maximum of £20,000 per year (for 2019/20) and can be split across the 5 main ISA classes being a cash ISA, a stocks & shares ISA, an innovative finance ISA, a Help to Buy ISA, a Lifetime ISA or a mixture of all of them.
Each tax year (April to April) you are given a maximum ISA allowance. For the 2019/2020 tax year this amount is £20,000 per individual and can be split across the different classes. Importantly the allowance does not roll over to the next tax year so either use it or lose it.
Innovative finance ISA’s are a new class of ISA that were launched in 2016, for investors seeking higher returns. The underlying activity of the ISA can vary but often include peer to peer lending, crowdfunding or property.
They are riskier than putting money into a cash ISA and are not covered by the FSCS. The fact you're lending the money means there's a chance the borrower won't repay. However, the greater risk is compensated by greater returns of up to 7% with QuickISA compared to returns of around 1.5% with a cash ISA.
To open a cash ISA, you must be a UK resident and aged 16 or over. For an IFISA or Stocks and shares ISA you must be over the age of 18.
When peer to peer lending occurs, there is a risk that the borrower may default on the loan and not repay it. In this situation it is possible that you could lose money. Similarly, a property backed ISA relies on the underlying property assets and could result in losses. However, the risk is compensated by greater returns with up to 7% returns per year. IFISA are not covered by the FSCS and the value of your investment could go down.
The return on an ISA depends on a number of factors including the provider, time period and risk level. Generally, cash ISA’s are the safest option and offer the lowest rates. QuickISA offer a range of IFISAs offering returns of up to 7% per year.
In July 2015, the rules surrounding ISAs were relaxed. Previously you could only put half into a cash ISA and half into a stocks and shares ISA or all in a single type.
Post 2015 you are now able to spread your £20,000 allowance across the 5 main ISA types in any ratio you wish.