ISAs

An ISA (Individual Savings Account) is a tax-efficient wrapper that can be applied to savings and investments. This means that any income or dividends that you receive from investments or savings along with any capital gains is tax-free. Anyone aged 18 or over can invest in an ISA, however you only need to be 16 to invest in a Cash ISA.

The current ISA allowance (which has been in effect since 6 April 2017) is £20,000 and will be applicable until the end of each tax year (5 April). If you do not invest your full allowance during the tax year, you cannot carry over any remaining amounts into the next tax year.

The current ISA offers flexibility that has not previously been available to investors. You can now choose to split your allowance however you choose. For instance, you could invest the full £20,000 allowance into a Cash, Stocks & Shares, Lifetime or Innovative ISA. Alternatively, you could invest your allowance in any combination of amounts between these up to the £20,000 allowance.

In the past, ISA rules stated that you can only subscribe to one ISA provider in any one tax year. However, from 6 April 2024, the rules have been relaxed. You are now able to invest in an ISA of the same type, for example a Stocks & Shares ISA with more than one provider in the same tax year as well as any other type of ISA. For a Stocks & Shares ISA, we still recommend that you to invest with a platform (also known as a 'fund supermarket') such as Fidelity FundsNetwork or Aegon where you have the opportunity to invest in a wide range of funds from various fund providers in the same tax year.

There are four types of ISAs available to adults and you are able to split your overall annual allowance of £20,000 between these in any way you wish.

• Stocks & Shares ISAs
• Cash ISAs
• Lifetime ISAs (only available to investors aged 18-40)
• Innovative ISAs

We can also arrange Junior ISAs. For more information, please click here.

Please note that at present Elson Associates only offers Stocks & Shares ISAs.

The current ISA allows for investors to transfer from a Cash ISA to a Stocks & Shares ISA and vice versa. When it comes to transferring a previous year's ISA, you can transfer from one provider to another whilst retaining the ISA wrapper. This will not affect your allowance for the current tax year. Please note that if you wish to transfer an ISA, you should not encash the investment yourself as any investment you make into an ISA after withdrawing funds will count towards your £20,000 allowance.

Investors can now pass on their Individual Savings Accounts (ISAs) to their spouse when they die and keep their tax free status.

Previous rules had removed the tax-exempt status of ISAs on the saver's death, meaning their widow would have to start paying tax on the total amount held within the ISA wrapper. We believe this is a welcome and long overdue change which has previously been the cause of much frustration at what would be a difficult time.