Individual Savings Accounts (ISAs)
Cash or Stocks and Shares?
There are two types of ISA: Cash ISAs and Stocks and Shares ISAs, (both of which may also contain a life assurance element, depending on how HM Revenue & Customs classifies the particular policy).
A Cash ISA allows you to save up to up to £3,600 per tax year tax-free with one provider. The remainder of the £7,200 annual allowance may be invested in a Stocks and Shares ISA with the same or a different provider.
A Stocks and Shares ISA allows you to invest up to £7,200 per tax year. If you do have a Cash ISA in the same year, any funds saved in your Cash ISA will reduce the amount you may invest in your Stocks and Shares ISA. For example, if you save £1,000 in a Cash ISA you may invest only up to £6,200 in a Stocks and Shares ISA.
You may switch your current year Cash ISA savings into your Stocks and Shares ISA. However, such transfers must be the whole amount saved in that tax year in the Cash ISA up to the date of transfer. You may then invest up to the remaining balance of the £7,200 ISA investment limit in your Stocks and Shares ISA or you may save up to £3,600 in a new Cash ISA.
You may transfer all or part of previous years' Cash ISA savings into a Stocks and Shares ISA without affecting your annual ISA allowance.
Although you may transfer funds in a Cash ISA into a Stocks and Shares ISA, you may NOT transfer investments in a Stocks and Shares ISA into a Cash ISA.
Anyone over the age of 16 may have a Cash ISA and save up to £3,600 each tax year but you may not invest in a Stocks and Shares ISA until the age of 18.
Tax Benefits
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