ISA – Which One?

Personal Savings Allowance

Everyone is familiar with the ISA but did you know that there are different types? Well, as we’re in a new tax year, here we give you a quick rundown as to the different types and who they are most suited to.

Basic ISA

This is the one most people are familiar with, and that everyone aged 18+ should have.

Available to invest into cash, stocks and shares, or a mixture of the two.

The current individual Annual Allowance to invest into an ISA is £15,240 for the current tax year and the same for the 2016/17 tax year. From 6th April 2017 to 5th April 2018, the allowance will be increased to £20,000.


Junior ISA

Parents can save on behalf of their children up to £4,080 tax-free each year.

The money saved can stay in the ISA until he or she turns 18, at which time it will become a Basic ISA as above. The child can take control of the ISA from age 16.

Children age 16 to 18 can have a Junior ISA and a Basic ISA.


Inheritance ISA

This ISA type can be opened by widows, a widowers and bereaved civil partners who have lost their spouse or civil partner since 3rd December 2014.

This ISA is in addition to the Individual Annual Allowance of £15,240

The additional allowance will be the same value as their partner’s ISA at the date of their death. the cash will be transferred into an account in the widow/widower’s name along with all interest. Income and withdrawals will be tax-free.

The individual has three years after their partner’s death to complete this, or 180 days after the administration of the estate is complete, if later.


Help to Buy ISA

Up to £12,000 can be saved and in addition the Government will add a 25% bonus of £3,000 if the maximum has been saved.

The Help to Buy ISA is open to those aged 16 or over and have never owned a home here or abroad. They must not have saved more than £1,200 into a Basic ISA in the tax year the Help to Buy is opened. See our Help to Buy page for more information.


Lifetime ISA

2017 will see the introduction of this new ISA. It will be available for those aged 18-39, allowing them to save up to £4,000 and receive a 25% top-up from the Government. Any amount that is contributed to this type of ISA will could towards your overall allowance of that particular tax year.

The funds can be withdrawn at any time to purchase a house up to the value of £450,000 or taken out when a person reaches the age of 60. If the money is withdrawn for reasons other than buying a house, there is a 5% charge and the Government top-ups will be removed as well as any interest or growth on that amount.


Flexible ISA

The new rules of the basic ISA, the whole £15,240 allowance can be invested, money can be taken out and replace without losing any of the tax-free entitlement.

It’s at the providers’ discretion as to whether they offer this or not so it’s worthwhile checking before investing.


Peer to Peer ISA

One for those who are willing to take more risk, the Innovative Finance ISA allows savers to invest with peer-to-peer lenders or invest in companies through crowdfunding websites. This process cuts out the middle man, the bank.

It’s important to note that these types of account are not covered by the Financial Services Compensation Scheme should the borrower defaults or the provider collapse.