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Guide to ISAs

ISA allowances and rules explained

ISAs offer a tax-efficient way to save and invest; find out what they are and how they work.

What is an ISA?

An ISA is an Individual Savings Account – it allows you to save or invest money in a tax-efficient way. An ISA (individual savings account) is a tax-free savings or investment account that allows you to put your ISA allowance to work and maximize the potential returns you make on your money, by shielding it from income tax, tax on dividends and capital gains tax. You need to bear in mind, though, that tax rules can change in future and that their effects on you will depend on your individual circumstances.

There are four main types of ISA to choose from:

Cash ISAs

A cash-only savings account based on a fixed or variable rate.

Investment ISAs

Also known as a stocks and shares ISA, an account that allows you to hold a wide range of assets, including cash, funds, shares, gilts, bonds, exchange traded funds (ETFs), exchange traded commodities (ETCs) and investment trusts. Unlike cash ISAs, these can fall in value as well as rise.

Innovative Finance ISAs

This higher risk option lets you lend your savings out to borrowers through peer-to-peer lending platforms, where interest earned is tax-free.

Lifetime ISAs

The lifetime ISA could help you get on the property ladder for the first time, or contribute towards your retirement savings.

Each tax year, all subscriptions made into a Lifetime ISA up to the maximum of £4,000, will receive a 25% government bonus. This is equivalent to a bonus of £1 for every £4 saved.

Barclays do not offer innovative finance or lifetime ISAs.

What’s the ISA allowance?

It’s a set amount you can put into ISAs (Individual Savings Accounts) each tax year, without paying tax on any money your ISAs make.

In the 2020/2021 tax year, your ISA allowance is £20,000. Here’s how you can use it

  • You can use your ISA allowance in full with either a cash ISA or an investment ISA or an innovative finance ISA, paying in £20,000
  • Alternatively, you can split your ISA allowance, using it as you wish across the four different types of ISA (subject to individual account limits), as long as you don’t pay in more than £20,000 across them all
  • If you opened a Help to Buy: ISA by 30 November 2019, you can pay in up to £1,200 in the calendar month of your first deposit and up to £200 each calendar month until 30 November 2029. A Help to Buy: ISA counts as a cash ISA, so if you’re paying into one in the current tax year, you can’t pay into another cash ISA
  • You can only pay into one of each type of ISA in each tax year
  • With a lifetime ISA, you can pay in a maximum of £4,000 in each tax year

Which Barclays ISA might be right for you?

A cash ISA may suit you best if you’re simply looking for a savings option with easy access to your money. If you’re prepared to take on the risk that you might lose money in exchange for a potentially higher return, you might want to consider an investment ISA. Alternatively, you may wish to consider making use of your other savings and investment tax allowances which apply to savings and investments held outside an ISA.

Just be mindful that, unlike cash savings, the value of investments can fall as well as rise and you may get back less than you invest. Tax-free means you won’t pay UK tax on any income or capital gains your ISA makes, provided all ISA conditions are met. Tax rules can also change, and their effects on you will vary depending on your individual circumstances.

Consider the following questions and select one or more, to reveal which Barclays ISA could suit you and your financial goals best.

Whether an ISA’s right for you will depend on your own individual needs and circumstances. These summaries are not recommendations and, in some cases, more than one ISA product could be equally suitable to your needs. Or you may decide that saving outside of an ISA is better for you. It’s important to consider all the benefits of each product and seek independent advice if you’re unsure. 

Helpful insights

Take a look at some of our resources to help you decide if you should use your allowance.

Cash ISAs

Enjoy a sweeter way to save and use your ISA allowance with one of our cash ISAs. You won’t pay tax on any interest your ISA makes.

Investment ISA

Enjoy a sweeter way to invest and use your ISA allowance with our Investment ISA. You won’t pay tax on any returns your investments make.