8 things you need to know about ISAs

1. Why should I get an ISA?

There aren’t many occasions in life that we are offered something tax-free, but an ISA - or Individual Savings Account - will allow you to invest your money without having to pay any tax on any interest that you earn. This differs from a normal savings account, where you will hand over at least 20% of the return on your savings straight to the taxman.

2. Is there a good time to get an ISA?

With an ISA, you can contribute tax-free savings up to a limit within any given tax year (April 6 to  April 5 the following year), which makes now the perfect time to invest.

3. There are two types of ISA

You can invest in a stocks and shares ISA, a cash ISA, or a combination of the two up to your annual limit.

4. The amount you can save into an ISA each year goes up

Before the new tax year started on April 5, you could make contributions to your ISA up to the value of £15,000. But from 6 April 2015, this limit was raised to £15,240, creating more opportunities to maximise the way you save.

5. ISAs are flexible

You can transfer a cash ISA to a stocks and shares ISA and vice versa. Those making monthly contributions can also start, stop, and change the amount whenever they want.

6. Choosing the right ISA doesn’t have to be rocket science

Those looking to open a stocks and shares ISA shouldn’t worry about getting caught up in any unecessary financial jargon – for instance with Standard Life’s MyFolio Stocks and Shares ISAs, savers can choose from a selection of ready-made funds chosen by experts.

7. Withdrawals are tax free

Whether you are a basic-rate or higher-rate taxpayer, you won't pay income tax on any interest you earn, and similarly you won’t pay any income or capital gains tax on any withdrawals made.

8. ISA allowances can be inherited tax free

The long-term benefits of ISAs for married couples and civil partners got a welcome boost from April when a new inheritable ISA allowance came into place.  This means that a surviving spouse or civil partner will now get an increase in their ISA allowance of an amount equal to the value of their spouse’s or civil partner's ISAs when they die.

Thanks to Julie Hutchison, Consumer Finance Expert at Standard Life for sharing these tips.

  • New rules now allow you to turn a child's Child Trust Fund into a Junior ISA. Find out more here. Plus, how to boost children's savings here.