INDIVIDUAL SAVINGS ACCOUNTS (ISAs)
Information on investing in ISAs

What are ISAs?

An Individual Savings Account (ISA) are cash investments which are tax-free. Any increase in the original sum that you invest (known as the capital sum) is not subject to capital gains tax. ISAs have taken over from tax-exempt special savings accounts (TESSAs) and personal equity plans (PEPs) as one of best ways to make money without paying tax.

Types of ISAs
There are two types of ISAs: the Mini ISA and the Maxi ISA. In addition, there are three different types of investments that you can choose to make up your ISA – stocks and shares, life company investments and cash.

How many ISAs can I buy?

There are rules about how many ISAs you can buy. In any one tax year (6th April one year to 5th April the next year) you can buy up to three different types of Mini ISAs or one Maxi ISA. You can't take out a Mini and a Maxi ISA in the same tax year. Depending if you choose a Mini or a Maxi ISA, there are limits to the amount of money you can put into your ISA. These are subject to change and you should always check the latest rules before investing.

For example, in 2005/06 the rules were as follows:

Mini ISA
An investor can take out up to three a year, but each one must be different type of investment. For example, this means that you can't have two cash Mini ISAs

Mini ISA one
Invest up to £3,000 in cash.

Mini ISA two
Invest up to £3,000 in stocks and shares.

Mini ISA three
Invest up to £1,000 in life company investments.

Maxi ISA
With Maxi ISAs you can only take out one a year. You can invest in just one type of investment, or all three types up to set limits.

Maxi ISA
Up to £7,000 invested in stocks and shares, or
A mixture of stocks and shares, cash and life company investments. Investing up to £7,000 in total, of which:

  • Up to £3,000 can be in cash.
  • Up to £1,000 can be in life company investments.
  • Up to £7,000 can be invested in stocks and shares.

 

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