Since its launch in 1999, the Individual Savings Account (ISA) has offered British investors a tax-free haven for their savings. Introduced by then-chancellor Gordon Brown, the ISA has saved investors tens of billions in capital gains and income tax. Indeed, this year alone, the tax wrapper is expected to save Britons over £7bn.
But by helping savers, the ISA has started to become a headache for the government. As public sector spending requirements continue to mount, the chancellor is seeking new ways to fill the public purse. Tax allowances and wrappers are an obvious place to look.
And so in last year’s Autumn Statement Jeremy Hunt announced a substantial decrease in the tax-free allowance for capital gains and dividends, making the ISA wrapper an even more important perk for Britain’s investors.
This article aims to help you take advantage of your ISA allowance in the current tax year and beyond. You will learn:
The answers to 10 frequently-asked questions about ISAs
How much ISAs can save you if you use them effectively
Why tax changes are making ISAs more important than ever
10 need-to-knows
1. What is an ISA?
An ISA is a tax-free savings account. Money saved within the ISA wrapper isn’t charged any income, capital gains, or dividend tax.
2. How much can I save in my ISA each year
All eligible ISA participants receive a £20,000 annual allowance. This renews at the end of each tax year on 5 April. You can’t roll your ISA allowance over into a new tax year. Use it, or lose it.
3. Is there a maximum amount I can save in my ISA
For now, there is no upper limit for how much you can save in an ISA. The only restriction is your £20,000 annual allowance.
4. What are the different types of ISA?
As of February 2023, there are five different types of ISA available in the UK.
Far and away the most popular ISA is the Cash ISA - a basic account where your savings will earn interest.
Stocks and Shares ISAs - the core focus of this article - allow you to hold a wide range of assets including investment funds, such as unit trusts, open-ended investment companies, investment trusts and exchange traded…
