Make your savings work hard with an ISA


Individual Savings Accounts (ISAs) are tax-efficient savings plans that allow you to shelter up to £20,000 in the 2017/18 tax year free from income and capital gains tax. So, if you’ve always been a saver but you’ve never considered an ISA you could be losing out to the tax man.

Make your savings work hard
You have a number of options when it comes to your ISA investment:

• Invest up to £20,000 in a stocks and shares ISA
• Invest up to £20,000 in a cash ISA
• Split the £20,000 between the two

Whichever route you choose, it’s important to take advantage of your ISA allowance every tax year. That way you can shelter more of your savings from tax and make your savings work for you.

Benefits of the ISAs
With a cash ISA, no matter the current interest rate, your savings will be free from income tax and will not count towards your Personal Savings Allowance. Therefore, you can save with a cash ISA and earn up to £1,000 income from any other savings (£500 if you are a higher-rate taxpayer), before having to pay tax.

Furthermore, by taking a stocks and shares ISA, you will not have to pay any Capital Gains Tax (CGT), which is a good option if you are likely to exceed your £11,300 annual CGT allowance.

Important points to consider
The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. The benefit of the tax treatment depends on individual circumstances.

Although there is no fixed term, you should consider stocks and shares ISAs to be a medium to long term investment of ideally five years or more.

The value of your investments and any income from them may fall as well as rise and is not guaranteed. You may get back less than you invest.