Individual savings accounts (ISAs) were introduced in April 1999. They replaced PEPs and TESSA and are effectively a tax wrapper within which you can hold a range of different investments. The big advantage of ISAs is that returns are tax-free – gains on investments held outside an ISA are liable to income tax or capital gains tax.
How much can I invest?
In an ISA Account, savers under the age of 50 can invest up to £7,200 in a single tax year – the over-50s can invest up to £10,200. This was announced in the 2009 Budget and took effect on October 6th 2009. This higher limit will apply to all savers from April 6th 2010. The tax year runs from April 6th to April 5th and it is important to use as much of your annual allowance as you can within that time as it cannot be carried over into the next financial year.
You can open one cash ISA and one stocks and shares ISA each tax year. Up to £3,600 can be invested in a cash ISA. (£5,100 for the over-50s since October 6th 2009). The remainder of your allowance can be invested in a stocks and shares ISA. Alternatively, you can just open a single stocks and shares ISA and invest the full amount in that.
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