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ISAs, explained
An ISA is an Individual Savings Account. It’s like a regular savings or investment account, except more tax efficient.
The need to know
- ISAs come in four different types: cash ISAs, lifetime ISAs, stocks and shares ISAs, and innovative finance ISAs.
- They can all help you save and invest your money tax efficiently.
- At the moment, the annual ISA allowance lets you put up to £20,000 in your ISA or ISAs. No matter how many ISAs you have, you can’t put in more than £20,000 across all of them.
- You need to be 18 and a UK resident to apply for an ISA.
What's the ISA allowance?
There’s a maximum amount you can pay into your ISA(s) each tax year (06 April to 05 April the next year). The allowance is decided by the Government. Right now, it’s £20,000. You can split that £20,000 up across multiple types of ISAs if you want to, but you can’t go over it no matter how many ISAs you hold.
Each ISA type has its own maximum amount you can invest:
- Cash ISA: £20,000
- Stocks and shares ISA: £20,000
- Innovative finance ISA: £20,000
- Lifetime ISA: £4,000
So you could split up your £20,000 allowance like this:
With us, you can have multiple ISAs of each type, except for cash ISAs. You can only pay into one Halifax cash ISA per tax year.
Each kind of ISA has its own benefits.
What do ISAs have to do with tax?
When you make a return on an investment or earn interest on savings, there are different types of tax that can impact how much you get to actually put in your pocket. ISAs are tax efficient, which means they can help you pay less tax on what you make.
Why does the tax year end matter?
When the end of the tax year comes around on 05 April, most of your tax allowances (including your ISA allowances) reset. That means you can start saving from £1 up to the maximum again.
But, unlike your pension allowance, your ISA allowance doesn’t roll over to the next tax year. For example, if you only saved £14,000 into your ISA, you can’t add the leftover £6,000 to your allowance next year, it stays at £20,000. So to make the most of the tax benefits, you need to maximise your allowance every year.
Your tax treatment depends on your personal circumstances, so it can change at short notice. If you want some guidance on investing, you can look for independent advice. Be aware that most advisers will charge you.
Let’s take a closer look
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If you’re a UK resident aged 18 or over, you can apply for a cash ISA or a stocks and shares ISA. You can also apply if you’re a Crown employee who lives abroad (such as a soldier or a diplomat).
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At the moment, if you go over the £20,000 annual ISA allowance, get in touch with your ISA provider(s). They’ll work with HMRC to fix the issue for you.
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You can, although you might have to pay a fee, depending on the providers. We don’t charge you anything to transfer.
Want to make a transfer?
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You can, but only with some of our ISA accounts.
With a flexible cash ISA, you can replace funds, but you need to do it in the same tax year in which you took the money out.
With fixed-rate cash ISAs, you cannot withdraw funds from the account without closing the account fully and you will be charged. You can also only add funds within the first 60 days.
With a stocks and shares ISA, any new funds you put in count towards your remaining ISA allowance, even if you’ve taken money out first.
Our investment ISA is a good option for full flexibility. You can withdraw and add funds as often as you like within the same tax year.
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You only need £1 to get going with one of our variable-rate cash ISAs or a stocks and shares ISA. Then you can add more later.
But to open an investment ISA, you’ll need to either pay a £500 lump sum or set up a £50 monthly direct debit.
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With a variable rate ISA, your interest rate can go up and down. With a fixed-rate ISA, your interest rate stays the same for the duration of your fixed term.
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The choice is yours. If you think you’ll want quick access to your money, consider a cash ISA.
However, ISAs that require you to leave your money for a set amount of time, like a fixed-rate ISA, usually offer a better interest rate. You can still get your money out if you need it, but you’ll be charged.
Stocks and shares ISAs and investment ISAs let you take money out whenever. But you’ll get the best return on them by leaving them for the medium to long term, which is at least 5 to 10 years.
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A few reasons:
- You’ve already used up your £20,000 ISA allowance
- You’re already investing your spare money tax efficiently, for example into a pension
- You’re not able to open an ISA if you’re not yet 18, or not a UK resident.
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We have flexible options. Our easy access cash ISA and our investment ISA let you take funds out and replace them later (so long as it’s within the same tax year), and it won’t affect your ISA allowance.
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Save or invest
Discover our ISA options and choose the one that’s right for you.
ISA allowance
Learn more about the ISA allowance and how much you can save each year.
Important legal information
Halifax Share Dealing Limited. Registered in England and Wales no. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.
Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628.