July 18th 2018

Which ISA is right for you?

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Matthew Bromley

You can maximise your tax-efficient savings through a range of Individual Savings Accounts (ISAs) – and the earlier you start, the better.

You can invest up to £20,000 in the 2018/19 tax year under your main ISA allowance using a mix of different types. Each has its own rules including limits, investment vehicles and access.

Regular ISAs

An ISA is a tax-wrapper through which you can invest in cash, stocks and shares, or a mixture. You don’t pay UK tax on interest earned on cash, or on income or capital gains derived from funds or other investments in a stocks and shares ISA. Nor do you have to include these accounts on a self-assessment form. There are no general restrictions on when you can withdraw funds, but special terms may apply for individual providers – for example with fixed-rate cash ISAs.

Innovative Finance ISAs

This ISA allows investment in peer-to-peer lenders or crowdfunding activities. These may offer attractive interest rates, but be aware that these higher–risk investments are not covered by the Financial Services Compensation Scheme.

Lifetime ISAs

You can put up to £4,000 a year into a Lifetime ISA and receive a 25% government-funded bonus, but you must be under 40 when you start. You can contribute until your 50th birthday. The funds can be used to help buy your first home or save for retirement and there are investment and cash options.

If you withdraw funds before the age of 60, and are not buying your first home, there will be a withdrawal charge equivalent to 25% of the amount you withdraw, unless you are terminally ill.

Help to Buy ISAs

These cash accounts are for first-time buyers, but you can only open a new one until November 2019. You can save up to £200 a month, and an extra £1,000 in the first month. The government adds a 25% bonus, up to a maximum of £3,000, in addition to any interest earned. There are no age restrictions on starting, but you will lose the bonus if you use the savings for other purposes.

Junior ISAs

Parents and others can save up to £4,260 tax free for a child, each year. Junior ISAs (JISAs) work in a similar way to regular ISAs, with cash and investment options available. The key difference is that the child cannot withdraw funds until their 18th birthday. At this point they can convert it into a regular ISA.

Contributions to JISAs are in addition to your main ISA allowance. It’s a great way to help a child build up assets for the future.

Please contact Matthew Bromley, Chartered Financial Planner at Cowgill Holloway Wealth Management for further advice or to discuss your situation.

The value of your investment can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.

The Financial Conduct Authority does not regulate tax advice.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.