ISAs are tax efficient and offer the potential for growth from some of the most exciting investment opportunities in the world – or greater security if required.

This guide is designed to help you understand why you need to think about ISAs, the issues you should be aware of and where you can get help and advice concerning what action you should take.

The Government is keen to increase the number of people in the UK who save money to provide for the future. As we are living longer, the financial strain on the welfare state needs to be counteracted by self-provision. Savings is a sensible area for the Government to incentivise with tax breaks, as about half of the UK population has less than £200 saved each. 40% of the UK population are currently saving nothing.

The Government has a target to double the number of people who save money – from 6 million to 12 million. The introduction of ISAs was designed to help reach this target. Many ISA offers will be tempting, but before you make your decision as to which one is best for you, it may be useful for you to have answers to some of the following questions.

What is an ISA?

Individual Savings Accounts are simple, flexible, tax-efficient savings plans that are widely available and easy to set up. You can open an ISA without giving instructions in writing, which allows ISAs to be set up over the telephone or through the Internet. The ISA manager will then send you confirmation of what has been arranged, which you can change if necessary.

You can also save in an ISA that will offer tax-efficient savings through a wide range of investments. ISAs may have one or two separate components:

• Stocks and Shares – which includes equities, unit trusts, OEICs, investment trusts, life assurance, gilts and corporate bonds
• Cash – which includes National Savings & Investment products, bank and building society accounts and cash funds.

You can choose to invest in one component of the ISA or two depending on your requirements and circumstances.

Who can invest in an ISA?

Anybody over the age of 18 (16 for a cash ISA) is able to save using an ISA as long as they are a UK tax resident. You can take out an ISA even if you are not currently working. You and your partner are both able to set up an ISA as you get separate ISA allowances. You cannot take out an ISA with somebody else as each ISA must be individually taken out. However, you can subscribe to an ISA on behalf of someone else, for example as a gift.

How much can I invest?

There is an overall maximum investment limit for ISAs, and separate limits for each element.

ISA: Must Knows

ISAs: Know Your Choices (Part I) - What is an ISA? Investment Limits Explained

ISAs: Know Your Choices (Part II) - Cash, Stocks & Share ISAs Explained

ISAs: Know Your Choices (Part III) - Maxi, Mini, Tessas & Peps Explained

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