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Guide to ISAs: allowances and rules explained

 

 

 

 

What’s new for ISAs

  • Save up to £15,240 in the 2016/2017 tax year
  • Withdraw and replace funds in the same tax year without affecting your annual ISA allowance (except Help To Buy: ISAs or Flexible Cash ISAs Issues 1-9)
  • Help to Buy: ISA  is available if you’re saving towards your first home
     

What is an ISA?

Tax-free savings account
An ISA is an Individual Savings Account that enables you to save or invest money without paying tax on the interest or on the investment returns you receive.

To open an ISA, you need to be a UK resident for tax purposes and aged 16 or over. For some ISAs, you may need to be 18 or over.


Annual allowances
For each tax year, there’s a limit to the amount you can deposit into your ISA – this is your annual allowance. The allowance for the 2016/2017 tax year is £15,240, which you can invest in a cash ISA, an investment ISA, an innovative finance ISA, or a combination of the 3.

If you subscribe to a Help to Buy: ISA , which is a cash ISA, monthly limits apply so the maximum you can save in each tax year is less than the ISA allowance. The limits are £1,200 in the first calendar month, and up to £200 per calendar month afterwards.


Tax-free interest every year
The tax year runs from 6 April to 5 April. Each tax year, you can either open a new ISA or top up an existing ISA until you reach your annual allowance. You’ll then earn tax-free interest on your whole balance every year.
 

Which ISA is right for me?

You can choose to open and save money in a cash ISA, an investment ISA, (or an innovative finance ISA – though we don’t offer these) – or a combination of all 3 in a single tax year.

First-time buyers can also chose a Help to Buy: ISA, which is a cash ISA. Please note that you can only open one Help to Buy: ISA and monthly deposit limits apply of £1,200 in the first calendar month, and up to £200 per calendar month afterwards.

A cash ISA may suit you best if you’re simply looking for a low-risk savings option with easy access to your money. If you’re prepared to take on some risk for a potentially higher return, you might want to consider an investment ISA.

Take a look at our comparison table to decide which of our ISAs is best for you.

  Cash ISA Investment ISA
Interest rate

Variable or fixed – depending on the cash ISA you choose

Linked to the stock market

Opening deposit amount

£1

£5

Access to your money

Instant or flexible – depending on the cash ISA you choose

Should be held for the medium to long term (5-10 years). Investments can usually be withdrawn at any point, but you may be charged or see the value of your investments fall

Risk

Low risk

Risk of losing some or all of your money

Charges

No administration or management costs for Barclays cash ISAs. Our fixed-rate cash ISA allows you to make 3 withdrawals free of charge

Annual management charges, fund administration and ISA administration fees

 

Transferring your ISA

Why transfer?

If you have more than 1 ISA (cash, investment or innovative finance) and you’d like to combine them or you’d like to transfer your money into a new ISA, it’s best to use the ISA Transfer Service to move or combine your savings.

Using the ISA Transfer Service means previous years’ savings you transfer won’t count towards your current annual allowance.

Remember, you can transfer all or just some of your other ISA balances, and you can also transfer between cash and investment ISAs.

Please note that a transfer-in to a Help to Buy: ISA is subject to the monthly Help to Buy: ISA limits of £1,200 in the first calendar month, and up to £200 per calendar month afterwards.

How to transfer

It’s easy to make a transfer to us – if you’re registered for Online Banking, simply log in to complete a transfer form giving us the account details of the other ISA(s) and we’ll do the rest.

Alternatively, you can call us on 0345 744 5445 1 or pop into a branch to arrange an ISA transfer.

It can take up to 15 working days for any cash ISA transfer to be completed, and a bit longer for investments. While the transfer takes place, any money in investment ISAs may not be invested in the stock market.

Withdrawing money from an ISA

While you can only make deposits into 1 cash, 1 investment and 1 innovative finance ISA each tax year, you may be able to withdraw money from your current or previous year’s ISAs at any time – depending on the terms of your particular ISA.

For all our cash ISAs (except Help to Buy: ISA and Flexible Cash ISA Issues 1-9), any funds you withdraw within a tax year can be replaced during the same tax year without counting towards your annual ISA allowance. This is known as ISA flexibility.

For example, if you pay in £10,000 to your ISA on 6 April 2016, your remaining allowance for the 2016/2017 tax year will be £5,240. If you then withdrew £5,000 from this ISA on 1 June 2016, your remaining 2016/2017 ISA allowance would be £10,240.

Remember that money you’ve withdrawn needs to be paid back into the ISA in the same tax year (if you choose to do so). You won’t be able to replace the money the following tax year without it counting towards your ISA allowance. The tax year runs from 6 April to 5 April the following year.

If you’d like to transfer your ISA to a new provider and where you’ve withdrawn previous years’ deposits from your ISA, any withdrawals not replaced prior to the transfer can’t be replaced with your new provider without counting towards your annual ISA allowance.

If you’ve made withdrawals and intend to redeposit it in the same tax year, you’ll need to ensure the ISA from which you made the withdrawal remains open.

Where you’ve withdrawn current year deposits from your ISA, your remaining current year ISA allowance will be transferred to your new provider.

For example, if on 1 June you deposit £5,000 and on 1 July you withdraw £2,000. And you then transfer your remaining current year deposits of £3,000 to a new provider, then your remaining current year ISA allowance with your new provider would be £12,240 (based on 2016/2017 ISA allowance of £15,240).

Our ISAs

Home insurance

Cash ISAs

Whether you’re looking for a fixed rate on savings, instant access to your money or help saving towards your first home, we offer 3 types of cash ISA – so you can choose which suits you best.

 

Investment ISA

Investment ISA

You can open an investment ISA on its own or as well as your cash ISA, as long as the combined deposit is no more than £15,240.

 

FAQs

  • If I open a cash ISA at the end of one tax year, what happens to the interest in the new tax year?

    The interest you earn on your money in a cash ISA remains tax free for the life of the ISA, providing all ISA conditions are met. The rate of the interest paid might change, but it will remain tax free. However, the government may change the ISA rules in the future.

  • If I transfer my previous years’ deposits into a new ISA, does it count towards my current tax year ISA allowance?

    No, it doesn’t. You are free to transfer previous years’ ISA funds into a new cash or investment ISA and this won’t count towards the current year’s allowance. For example, if you have £20,000 in previous ISAs, you can transfer the balance into your new ISA and still have your £15,240 allowance for the current tax year. The interest on the combined balance will also be tax free.

    Remember to complete a transfer form, which you can do in branch, over the phone or by logging into Online Banking.

  • What happens if I inherit an ISA allowance from a spouse or civil partner?

    You can inherit ISA benefits that your spouse or civil partner had built up in any ISAs they had, if they passed away on or after 3 December 2014.

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