financial planning

New ISAs guide

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ISAs are now more flexible than they've ever been giving savers more control over their tax-free savings.

What is an ISA?

An ISA (Individual Savings Account) is effectively like any other savings account, only it comes with an annual savings limit, the interest you earn up to this being paid tax-free.  

Stocks and shares ISAs are free from capital gains tax on any profits when you come to sell. 

Favourable changes

In the current 2016/2017 tax year, you can save up to £15,240 into an ISA, and this will rise to £20,000 in the 2017/2018 tax year.  

Thanks to an overhaul of ISAs in 2014, you can now hold as much as you like of this ISA limit in cash. Previously you could only put a maximum of half of your annual ISA allowance into cash, while the whole amount could be invested in stocks and shares.

This is great news for savers who prefer to steer clear of the stock market.  

Savers can also now switch freely from cash to stocks and shares and vice versa, giving you greater control over your savings. Under the old ISA regime, you could only transfer money from cash to stocks and shares, not the other way round.

And since April 2016, i f you hold cash in an either an investment, cash, or innovative finance ISA, you can take this cash out of your account and put it back in within the same tax year without this affecting your annual allowance. Not all ISA providers may offer this flexibility, so check with yours before withdrawing any money. 

 
Savers can also now switch freely from cash to stocks and shares and vice versa, giving you greater control over your savings

Switching accounts

You can switch your ISA if you are unhappy with its performance. You would have to transfer all the savings from the current tax year (April 6, 2016 to April 5, 2017), but you can split ISA contributions from previous tax years. 

Note that ISAs and NISAs are the same in that you should never just withdraw money with the intention of putting it into a new plan. If you do, you will lose your tax-free status. 

Instead, you need to notify your new provider of your intentions and let them take care of the transfer arrangements – which they will be more than happy to do!

Investment choice

Savers can now hold a broader range of investments in an ISA than they could previously. 

Corporate bonds with less than five years until maturity were allowed into ISAs for the first time from July 1, 2014. Bonds are essentially ‘IOUs’ from companies. Investors receive an annual return, plus the return of their original investment if they hold the bond until maturity. 

You can also hold peer-to-peer loans within an ISA too, through new innovative finance ISAs, which came into effect on April 6, 2016.

Young savers

The allowance for Junior ISAs (JISAs) – which are tax-efficient savings plans for children under the age of 18 – remains at £4,080 in the 2016/2017 tax year. 

And savers between the ages of 16 and 18 will also get the £15,240 ISA allowance which they can invest in cash. This is important as you cannot open a stocks and shares NISA until you are 18.

  1. Limited offer

    Earn a bonus interest rate of 1.00% tax-free/0.89% AER (fixed) for 12 months when you save £20,000 by 5th May 2017

    Great for
    Transfer in existing ISA balances
    But be aware that
    The rate of 1.05% applies to the first £20,000 only if deposited or transferred by the 5th May 2017. If you do not deposit or transfer at least £20,000, your rate will be 0.05% AER
    Before bonus, balances of £25,000 or more will receive a rate of 0.50% Tax-free p.a./AER (variable)
    After the 17th May 2018 the bonus rate ends, and your rate will drop to 0.05% AER (variable)
  2. Great for
    Full online application and access
    The ability to split your cash ISA savings across variable and fixed rate products in one place
    But be aware that
    Interest is calculated daily and paid annually in March. After 12 months the rate will revert to the underlying rate, currently 0.25% tax free/AER variable
    If you opt to fix your savings withdrawal restrictions will apply
    Online ISA is provided by OneFamily, savings in Post Office Money® Cash ISAs are deposited with Bank of Ireland UK
    • Provider/Product name Cash ISA

      NatWest

      Cash ISA

    • Interest rate (AER) 1.01% Variable Includes Fixed bonus of 1.00% for 12 months
    • Min/Max opening amount £20,000 to £20,000
    • Notice / Term Notice Period: instant
    • Account type Cash ISA Transfer In
    • Access Internet Post Telephone In Branch
    • Go to site

      More details

    Limited offer

    Earn a bonus interest rate of 1.00% tax-free/0.89% AER (fixed) for 12 months when you save £20,000 by 5th May 2017

    Great for
    Transfer in existing ISA balances
    But be aware that
    The rate of 1.01% applies to the first £20,000 only if deposited or transferred by the 5th May 2017. If you do not deposit or transfer at least £20,000, your rate will be 0.01% AER
    Before bonus, balances of £24,999 - £49,999 will receive a rate of 0.05% AER, balances from £50,000 - £99,999 will receive a rate of 0.25% AER, and balances of £100,000+ will receive 0.50% AER
    After the 17th May 2018 the bonus rate ends, and your rate will drop to 0.01% AER (variable)
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