What is an ISA?
The government offers generous tax breaks to encourage you to save, and one of the most popular and accessible is an ISA.
An ISA, or Individual Savings Account, is not an investment in its own right. The best way to think of an ISA is as a 'wrapper' in which you can shelter your savings and investments from tax.
What you need to know about ISAs
Please remember the value of tax savings depends on your circumstances and tax rules can change over time.
- You pay no capital gains tax and no UK tax on any income.
- You don't need to declare ISAs on your tax return.
- Any UK resident aged 18 or over (16 for Cash ISAs) can invest. There's no upper age limit and you can withdraw your savings whenever you need.
- The amount you can invest into an ISA each tax year is decided by the government, this tax year (2021/2022) the allowance is £20,000.
- In many cases, it costs no more to hold cash and investments inside an ISA than to hold them outside so investors can receive these benefits for free.
- Used regularly, your annual ISA allowance offers you the chance to create a substantial portfolio sheltered from the taxman.
For those with the money to spare, Hargreaves Lansdown believes there is little reason not to open an ISA.
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