Individual Savings Accounts - ISAs

Compare top ISA rates

Keep your money from the taxman by saving in an ISA.
You can invest up to £20,000 in a cash ISA, a stocks and shares ISA,
or a combination of the two

ISAs

ISAs (Individual Savings Accounts) are a special type of savings account that allows you to save and avoid paying tax on the interest you earn, regardless of your income. They were introduced in 1999 to encourage people to save, but there is a cap on how much you can put away in an ISA. For 2018/19 the ISA limit is £20,000.

It’s up to you whether you save entirely in cash, entirely in stocks and shares, in a relatively-new Innovative Finance ISA (IFISA), or any combination of the three as long as it doesn’t exceed the £20,000 yearly limit.

You can also save in a Help to Buy ISA and a Lifetime ISA, which have different rules and limits on how much you can put away, but which also count toward the yearly allowance.

However, with the average person saving £5,558 in ISAs in the 2016/17 financial year, the £20,000 cap far exceeds a typical level of saving in the UK. That’s according to government statistics that track savings in cash ISAs, stocks and shares ISAs and Innovative Finance ISAs. 

Average amount held in ISAs

How ISAs work

It’s difficult these days to get decent return on your savings – and that makes using your tax-free ISA allowance more important than ever. During this tax year, which ends on 5 April 2019, you can stash up to £20,000 into ISAs and you won’t pay tax on any interest you earn.

If you don't use up your ISA allowance, you can’t carry it over into the new tax year – which is another reason to try to save as much as possible.

You can open one cash ISA, one stocks and shares ISA and one IFISA per year. They can run concurrently, and you can invest up to £20,000 per year spread over the accounts. There isn’t a limit on how many ISAs you can have in the long run though, just the amount you can open per year.

You can also save or invest your annual limit into the same ISA, year after year - in other words, you could continue to save into an ISA you opened in 2009, but the amount involved would be deducted from your allowance each year.

In addition, if you take money out of the ISA – to do home repairs, for example – you are allowed to replace that money during the same year without it counting toward your £20,000 allowance. This rule was relaxed in 2015, as previously any money you took out of an ISA could not be replaced - you could only add to the account from your unused annual allowance.

As a result of this enhanced flexibility, ISAs may appeal to people who previously would have opted for bonds or ordinary savings accounts.

ISA comparison

An ISA comparison is the easiest way to find the best interest rates. You can compare our selection of the best ISAs on one simple page and review the results in an easy table. And if you prefer to search a wider range of ISAs based on how much you have for a starting balance, we will do this for you. You can even compare ISAs with the highest interest rates by sorting the results this way.


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ISAs providers

 

ISA types explained

What is a cash ISA?

Cash ISAs are basically ordinary savings accounts but you won’t pay tax on any interest you earn.

As with a mainstream savings account, you must be a UK resident and aged over 16. With a cash ISA you’ll never be taxed on your interest, but you can’t deposit more than £20,000 in any one tax year.

For basic rate taxpayers, this tax relief on ISA interest isn’t overly attractive. That’s because, thanks to the personal savings allowance, introduced in 2016, basic rate taxpayers can earn up to £1,000 of interest in any kind of account and not pay tax. For higher rate taxpayers this allowance is £500.

It might seem that cash ISAs have been made redundant, but any interest earned in an ISA doesn’t count towards your personal savings allowance, which could be useful for those with substantial savings.

Also, ISAs are a well-established part of the savings landscape, but there is no guarantee underpinning the existence of the personal savings allowance.

If you’re looking to open this type of savings account, the easiest way to search for the best deals is to compare cash ISAs with MoneySuperMarket.

If you already have an ISA balance and are looking for a better deal, you will need an account that accepts transfers-in from existing ISAs from previous years.

What does it mean when ISAs have a fixed-rate?

A fixed-rate cash ISA is a savings account which has a specific interest rate for a certain period of time, hence the name. They are good for taking advantage of the ISA allowance, if you have enough money to effectively lock away those savings for one to five years.

The interest rate will usually be higher for a fixed-rate ISA because a bank presume that your money will be in the coffers for the whole term, meaning it can invest your money for longer and potentially make more profit for the institution.

One of the downsides to a fixed-rate ISA is that there may a large penalty for taking your money out before the end of the term. Also, you might not be able to transfer money from a cash ISA into a fixed-rate ISA, but you would need to check with your provider. 

Average ISA savings by age

What is an Instant access cash ISA?

An instant access cash ISA is just another type of cash ISA that does exactly the same as a normal ISA but you can access your money quickly and simply, instead of having to request a withdrawal from the bank. They are particularly handy if you want easy access to funds.

With such easy access to your money, you will probably lose out on the interest rate, which tends to be higher on fixed-term ISAs. Find out about interest rates when you compare instant access cash ISAs.

What is a junior ISA?

If you’re worried about how you are going to pay for your child’s first car, or an expensive university education in the future, then a junior ISA could be a good idea for you.

The great thing about a junior ISA is that your child cannot touch the money until he or she is 18 years old, after which the account becomes a normal ISA.

It’s easy to check for interest rates and explore junior ISAs on MoneySuperMarket’s comparison tool. 

What type of ISA is the most popular

Stocks and Shares ISAs

You can invest your full ISA allowance of £20,000 in a stocks and shares ISA if you want. Stocks and shares ISAs come in two forms – ISAs from direct providers and self-selected fund ISAs.

Stocks & Shares ISA Direct Providers

Unlike cash ISAs, stocks and shares ISAs put your money in the stock market, meaning the amount could go up or down with the share price. As direct ISA products usually track performance of stock markets, like the FTSE 100, they are normally investments managed by a provider.

The idea behind a stocks and shares ISA is that you don’t need to be actively monitoring things every single day. You must trust that the bank or provider will be investing wisely for your money, but as with any shares, prices increase and decrease across the year so you are not guaranteed a return.

Plus, you need to remember that the capital paid in is not protected like a cash ISA, so there is a risk that you might not get back even as much as you have paid in.

Take a look through our list of S&S ISA Direct Providers to compare deals on the market.

Self-selected fund ISAs

They are great if you want to be in control of exactly which investments you make, with whom and when.

These plans tend to be more suited to experienced investors, as they can be higher risk, and your capital is not protected. This means you may not get back as much as you have paid in.

Compare self-select ISAs

Innovative Finance ISAs

A relative newcomer to the ISA market, the Innovative Finance ISA launched in 2016 and is a way of investing money without saving cash or utilising the stock market.

Instead, an IFISA uses peer-to-peer lending and your money is borrowed by both businesses and individuals looking for a better rate. It basically cuts out a middleman, for example a bank, and because of this their use is growing fast.

Their rising popularity is perhaps due to the high rates of interest. The rate that you get is worked out by the borrower’s credit history – so if they have a good history then you will get a lower rate back, say 3-4% interest for example. But if the individual borrowing has an average credit rating, then you will get a higher interest back, say 5-6% – because of the increased risk you face.

There is a certain level of risk involved with an IFISA: if the business fails or the person you lend to defaults on the debt, then you may be left with less money back. However, your money will be spread between different debtors to lessen this risk.  

If you invest in an IFISA, you need to know that your money is not protected by the Financial Services Compensation Scheme like it would be in other ISAs.

The peer-to-peer lender you use may have its own scheme, so make sure you check this out. And, if the peer to peer lending site holds your money in a client account opened with an FAS-authorised bank or building society, the FCSC would cover the investor up to the maximum claim limit.

Savings outside your allowance

If you have already filled your ISA allowance, then there could be much better places than an easy access savings account to put the remainder of your cash. Check out all your options here at our dedicated savings hub.

Remember too that all basic rate taxpayers can now earn £1,000 of savings interest a year without having to pay any tax on it thanks to the new Personal Savings Allowance (PSA). You’ll be a basic rate taxpayer in the 2017-18 tax year if your income is anything less than £45,000.

If you’re a higher rate taxpayer, paying tax at the 40% rate on an income between £45,001 and £150,000, you’re entitled to a lower PSA of £500 a year. 

If you’re an additional taxpayer earning £150,001 or more, you won’t get an allowance at all. 

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