ISA's

Guide to Individual Savings Accounts (ISAs)
Individual Savings Accounts ISAs are tax-free Savings accounts which means individuals do not have to declare any income or capital gains they receive to the Taxman. Individuals can save up to £7,200 each financial year. A financial year runs from 6th April until the 5th April the following year.
ISAs were brought in by the Government in April 1999 to replace Tax Exempt Special Savings Accounts (TESSAs) and Personal Equity Plans (PEPs) and are guaranteed to run until at least 2010.

Who can open an account?
To open an ISA individuals must be 18 years old or over. However, if an individual is aged 16 and over they are entitled to open a Mini Cash ISA or the cash component of a Maxi ISA. Individuals must be UK residents for tax purposes. People working abroad or Spouses and Civil Partners of individuals working abroad, for example Civil Servants or Armed Forces who are paid by the British Government, are also entitled to open an ISA.

ISAs cannot be held as joint accounts or on behalf of other individuals.

Maxi ISAs and Mini ISAs are made up of 'components'. There are two different components people can invest their money into. The different components are: - Cash and Stocks & Shares (Equities).

Cash Component
This component allows individuals to invest in Building Society deposits, UK and European authorised Bank deposits, cash unit trusts or National Savings. This is a good choice for short-term savings especially if individuals want to access their money easily.

Stocks & Shares Component
This component allows individuals to invest in collective shares, for example, Unit Trusts, Investment Unit Trusts, shares listed on a recognised stock exchange, bonds and gilts and Life Assurance. This type of ISA is good if individuals are able to leave their money alone for a long period of time, usually over five years, and are comfortable taking on the risk of market fluctuations in the value of their investment.
With these types of accounts there is no guarantee that the return at the end of the term will exceed the amount invested.

Different Types of ISAs
There are two types of ISAs - Maxi ISA and Mini ISA. An individual can only subscribe/contribute to either one Maxi ISA or up to two Mini ISAs (one for each component), each tax year. Money cannot be invested in both a Mini and Maxi ISA in the same financial year.

Maxi ISA
Individuals can invest money in up to two different components (Cash and Stocks & Shares) for each Maxi ISA. A Maxi ISA must have a stocks & shares component, but the Life Assurance and Cash component are optional. A maximum of £7,200 can be invested each financial year. This can be divided between the two components in whichever way an individual wishes. See table below for investment options and limits.

Mini ISA
Individuals can only invest in one component of a Mini ISA each financial year. Unlike the Maxi ISA, the amount you can invest is fixed for each component. The maximum amount you can invest into stocks and shares is £4,000.