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ISA Explained

ISA’s are a popular means of saving – please see below our guide to ISA’s and how they work.


Put simply there are 4 types of Individual Savings Accounts (ISA):

  • Cash ISA
  • Stocks and shares ISA
  • Innovative finance ISA
  • Lifetime ISA


You do not however need to pay tax on:

  • Interest on cash in an ISA
  • Income or capital gains from investments in an ISA


In addition, if you complete a tax return, you do not need to declare any ISA interest, income or capital gains on it.


Putting money into an ISA


Every tax year you can put money into one of each kind of ISA. The tax year for ISA’s runs from 6 April to 5 April and you can save up to £20,000 in one type of account or split the allowance across some or all of the other types.


You can however only pay £4,000 into your Lifetime ISA in a single tax year. Please see below a few examples as to how this can work in practice:

  • You could save £15,000 in a cash ISA, £2,000 in a stocks and shares ISA and £3,000 in an innovative finance ISA in one tax year.
  • You could save £11,000 in a cash ISA, £2,000 in a stocks and shares ISA, £3,000 in an innovative finance ISA and £4,000 in a Lifetime ISA in one tax year.


Your ISAs will not close when the tax year finishes and you’ll keep your savings on a tax-free basis for as long as you keep the money in your ISA accounts.


What Can You Include in Your ISAs?


Cash ISAs can include:


Stocks and shares ISAs can include:

  • Shares in companies
  • Unit trusts and investment funds
  • Corporate bonds
  • Government bonds


Please note however that you cannot transfer any non-ISA shares you already own into an ISA unless they’re from an employee share scheme.


Lifetime ISAs may include either cash and stocks& shares, whilst Innovative finance ISAs include:

  • Peer-to-peer loans – non-bank loans that you give to other people or businesses
  • ‘Crowdfunding debentures’ – investing in a business by buying its debt


You cannot transfer any peer-to-peer loans you’ve already made or crowdfunding debentures you already hold into an innovative finance ISA.

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