Individual Savings Accounts (ISAs) (2024)

FAQs

Am I better with an ISA or a savings account? ›

If you want to protect yourself from paying tax on any interest income, then an ISA may be your best choice. But if you want to frequently add and withdraw money, a general savings account may better suit your needs.

There are four types of adult ISAs: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA and individuals can subscribe up to £20,000 across all ISAs for the year 2024/25. The Lifetime ISA has its own subscription limit of £4,000 per year which forms part of the overall £20,000 limit.

An Individual Savings Account is an account that allows you to save and invest free from UK tax. You can save in a cash ISA, a stocks and shares ISA, a Lifetime ISA, an innovative finance ISA or many combinations of the four, as long as you do not exceed the annual limit.

Even with PSAs, ISAs are still a good option for many people. There are several benefits to ISAs, including for long-term savings, inheritance, and reducing risk. We outline the personal savings allowance and why ISAs are still an attractive option below.

ISAs are very common in the UK, as no further UK tax is due on the income generated in an ISA and they are free of capital gains tax. However, they can be very problematic for US citizens or Green Card Holders. When ISAs become problematic for US citizens or Green Card Holders depends on the type of ISA.

There is a similar structure in the U.S., namely the Roth IRA, which has similar benefits to an ISA. All contributions grow free from income and capital gains tax and in addition, there are no taxes or penalties if you want to take out the capital you have put in (excluding income and gains).

Non UK residents cannot normally open an ISA. Expats may be able to keep their ISA, but they cannot add any more funds to it or open a new one, as long as they are not resident in the UK. We cannot advise you with regards what to do with your existing ISA. You may need to speak to an financial adviser.

What happens to your ISA if you move abroad? ›

As you have moved abroad, you can no longer contribute to the ISA after the end of the tax year that you moved. No-one else will be able to contribute to it either. You can still keep your savings in the ISA and get tax relief on money and investment held in it.

ISA stands for Individual Savings Account. The main difference between an ISA and any other savings account is that it offers tax-free interest payments. So you could get more for your money.

The key difference between an ISA and a savings account is the tax you pay on your returns. When you earn interest on your savings it is liable for income tax. Basic-rate taxpayers can earn up to £1,000 interest a year before income tax is due, and higher-rate taxpayers can earn up to £500.

ISAs are a tax-efficient way to save money. The government sets a limit for how much can be saved each financial year, and doesn't charge any tax on the interest/income you earn.

Normal savings beat cash ISAs for most.

If you won't make this much interest, you won't pay any tax, so should focus on moving your money to the highest interest rate, which is usually in a Top Savings Account.

You do not pay tax on: interest on cash in an ISA. income or capital gains from investments in an ISA.

That tax saving on income taken from ISAs in retirement can be considerable. But it's worth remembering that any money you put into your ISA has had Income Tax deducted before you invest it. Using that, combined with your personal allowance, means you can plan your retirement income tax-efficiently.