ISA - Individual Saving Account

Posted - 02/05/12

ISA's are a saving account which are not currently taxed by the UK government. Normal current and saving's accounts are taxed,

• For normal rate tax payers they are taxed - 20%
• For higher rate tax payers, they are taxed - 40%

The advantage of an ISA is that neither of the above is applicable to them. The drawback to an ISA is that there is a limit to the amount of money which can be invested into them for each tax year. The amount, or allowance, which can be placed into the ISA usually changes each year - to take into account inflation etc. At present, you can currently invest £11, 280, or, £5,640 for a cash ISA.

There is an age limit for investing into an ISA, which is currently 16 or over. If you have forgotten, the tax year runs from the 6th of April till the 5th of April of the following year. Therefore, you can only invest your full allowance once during that time period. You can remove funds from an ISA at any point in time, that's assuming that you applied for an easy access ISA.