Individual Savings Accounts (ISA)

ISAs provide investors with the opportunity to build up assets which are not subjected to income tax or capital gains tax within a holding or upon withdrawal. Cash and a broad range of investments such as Unit Trusts and OEICs can be held and there is no restriction on when or how much money can be withdrawn. There are two types of ISA, cash or stocks and shares. ISAs are available to UK residents aged over 16, but individuals between 16 and 18 are only permitted to use the cash component.

There are restrictions on investing in ISAs in tax year which affect the type of ISA that may be opened and the cumulative amount of investment during the course of that year. No more than the annual amount limit (£10,680 for 2011/12) can be paid in and the amount that can be in cash is restricted (£5,340 for 2011/12). Any amount not used for cash can be used in a stocks and shares ISA.

Newly subscribed (paid in) money in the current tax year can only be held in up to one cash ISA and up to one stocks and shares ISA. These restrictions only apply to money paid in during the current tax year. An unlimited number of accounts can hold money from past years and it can be freely moved between providers using ISA transfer requests.