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Money tips and MYJAR news

MYJAR Explains: Individual Savings Accounts (ISAs)

It’s nearly that time again - the tax year is coming to an end, and that means you need to act fast to fill your ISA with as much as you can before your allowance ends. If you’re not sure how an ISA works, we’ve put together a guide so you can understand how the end of the tax year will affect you if you decide to sign up for an ISA.

What is an ISA?

An ISA (individual savings account) is a term for a UK account that allows you to hold cash or shares without having to pay tax on the interest or gains you make. Your ISA allowance is the maximum you can put in the account from the beginning to the end of each tax year (April to April). The amount is presently £15,000 per person over 16. The money needs to be invested in a special account and it can be invested in cash, shares of a mixture of both.

If I Have an ISA, What Does the End of the Tax Year Mean for Me?

You have to save or invest with your ISA by the end of the tax year in April, for it to count for that year. Any unused allowance won’t roll over, so if you don’t use it you’ll lose it! You will get a new allowance for the new tax year, but you will have lost out on maximum savings for this year.

Different Types of ISA

There are two kinds of ISA, cash ISAs and stocks & shares ISAs.

A cash ISA is savings account where you don’t pay tax on the interest. This means that you’re very unlikely to find a savings account that offers a better interest rate. Like with normal savings accounts, there are different types of cash ISA - for example fixed-rate deals and instant access accounts. There’s no fee for setting up a cash ISA.

A stocks & shares ISA can be used for invest in shares, bonds and funds. These ISAs are generally managed by a broker or a fund management company. You will generally be charged a fee for opening a stocks & shares ISA.

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk