financial planning

New ISAs guide


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.

    • Provider/Product name Cash ISA

      Sainsbury's Bank

      Cash ISA

    • Interest rate (AER) 0.80% Variable
    • Min/Max opening amount £500 to £ no limit
    • Notice / Term Notice Period: none
    • Account type Cash ISA Transfer In
    • Access Internet Post Telephone In Branch
    • Go to site

    Great for
    Transferring existing ISA balances
    Make multiple deposits up to the £15,240 annual allowance - or the full amount in one transaction
    For new and existing customers
    But be aware that
    Lower rate of 0.50% AER for balances that fall below £500
    Once fully funded any withdrawals cannot be replaced
    Interest paid annually. You must be aged 18 or over and a UK resident.
  1. Great for
    Opening an account with just £1
    Unlimited withdrawals without penalty
    Transferring existing ISA balances
    But be aware that
    Interest is paid annually

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