UK Individual Savings Accounts

An Individual Savings Account (ISA) is a type of savings account. Basically, if you save in an ISA you are entitled to keep all that you receive from that investment and not pay any tax on it. This is not the case with, for example, an ordinary bank or building society account unless you are a non-taxpayer.

ISAs began on 6 April 1999 and will be around for the foreseeable future. You can start with small amounts and save up to £11,280 in the tax year 2012-13. A tax year runs from 6 April to 5 April in the following year.

Introduction
There are two types of ISAs: a cash ISA placed in an interest paying account; and a stocks and shares ISA which is invested in bond, stock, or pooled investment instruments.

In addition to regular ISAs, Junior ISAs for children are also available in cash or stocks and shares ISAs. To qualify, a child must:


 * Be younger than 18 years of age;
 * Live in the UK;
 * Can not be entitled to a Child Trust Fund (CTF) account. Most children born between 1 September 2002 and 2 January 2011 did qualify for a CTF.

Contribution limits
In the tax year 2012-13, which ends on 5 April 2013, you can put in up to £11,280 into ISAs.

Subject to this overall limit, you can put up to £5,640 in a cash ISA and the remainder of the £11,280 into a stocks and shares ISA with either the same or another provider.

So, for example, you could put:
 * £5,640 into a cash ISA and £5,640 into a stocks and shares ISA
 * £3,000 into a cash ISA and £8,280 into a stocks and shares ISA
 * nothing to a cash ISA and £11,280 to a stocks and shares ISA

Junior ISA features
The features of a child's Junior ISA include the following:
 * The annual contribution limit for the tax year 2012- 2013 is £3,600 per child per tax year. The limit is inflation adjusted each year.
 * The account is held in the child's name. A parent or guardian can open and manage the account. A child aged 16 or 17 can open their own ISAs.
 * Anyone can contribute to a child's Junior ISA up to the annual limit.
 * No withdrawals permitted until the child attains 18 years of age, with an exception in the case of terminal illness or death. At 18, the ISA converts into a regular ISA, under the child's control.
 * The tax advantages of a regular ISA accrue to the Junior ISA.

Tax considerations
You pay no tax on any of the income you receive from your ISA savings and investments. This includes dividends, interest and bonuses.

You pay no tax on capital gains arising on your ISA investments (losses on ISA investments cannot be allowed for Capital Gains Tax purposes against capital gains outside your ISA).

The insurer does not have to pay tax on income and capital gains on investments used to back your ISA life insurance policies. You do not have to pay any tax when the policy pays out.

You can take your money out at any time without losing tax relief.

You do not have to declare income and capital gains from ISA savings and investments or even tell your tax office that you have an ISA.