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Why are ISAs so popular?

Find out how Individual Savings Accounts (ISAs) work and understand the differences between cash, investment, innovative finance & lifetime ISAs.

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

An ISA is an Individual Savings Account

Reasons to choose an ISA

Capital Gains Tax

Income tax

Tax on dividends

Growth Interest Dividends

Income growth

Capital growth

 

All income or gains you receive in your ISA will be protected from income tax, tax on dividends and capital gains tax (CGT).

However, tax rules can change however and any benefits from them depend on your circumstances. Bear in mind too that investments can fall in value. You may get back less than you invested. 

Types of ISAs

Cash ISAs

A savings account based on a fixed or variable deposit rate.

Innovative finance ISAs

A higher risk arrangement that allows you to lend your savings out to borrowers through peer-to-peer lending platforms.

Investment ISAs

Also known as a stocks and shares ISA, an account that allows you to invest in a wide range of assets, including cash, funds, shares, gilts, bonds, exchange traded funds (ETFs), exchange traded commodities (ETCs) and investment trusts.

Lifetime ISAs

The lifetime ISA is a deposit account which helps savers get on the property ladder for the first time or contribute towards their retirement savings. The government pays a 25% bonus on cash paid in, up to a maximum of £4,000, equivalent to £1 for every £4 saved. But they are not flexible and there are penalties if you withdraw money for other uses.

More to play for

Tax-free investing

ISA allowance for the 2019-20 tax year will remain at £20,000, of which a maximum of £4,000 can be paid into a lifetime ISA.

Tax rules can change and any benefits from them depend on your circumstances.

Choice of accounts

A wide choice of investment options to choose from with increased flexibility.

  • Cash with a cash ISA
  • Cash and investments with an investment ISA
  • Peer-to-peer lending with an innovative finance ISA
  • Cash and investments with a lifetime ISA

Flexible options

You can split your ISA allowance between a cash, investment, innovative finance, or lifetime ISA,1 provided you stay within the £20,000 limit.

You can take advantage of the flexible ISA rules with Barclays – you can withdraw money from our Investment ISA and replenish it within the same tax year, without this counting towards your annual ISA limit. Not all ISA providers offer this flexibility. Maximum of £4,000 can be paid into a lifetime ISA per year.

Freedom to transfer

You can transfer money freely between a cash ISA, an investment ISA and an innovative finance ISA, as your needs and risk appetite changes over time.

Since 6 April 2018, if you move any money out of a lifetime ISA, you will forfeit the government bonus and face a 5% charge on the amount transferred out. You can also transfer cash or investments into a lifetime ISA up to the annual limit, and still receive the government bonus but it does not represent use of your annual allowance.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

Investment ISA

An easy way to start investing

Also known as a stocks and shares ISA, an Investment ISA is a tax-efficient2, simple way to invest for your future. Invest up to £20,000 per year and the returns you make from your investments are tax-free.

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Transferring ISAs

There are a number of reasons why transferring your Individual Savings Account (ISA) could stand you and your investments in good stead , although make sure you’re aware of the potential drawbacks too.3