An ISA is a savings account where you can earn interest tax free.
For the 2015-2016 tax year, you are able to put £15,240 into an Individual Savings Accounts (ISAs). From this amount you are able to earn interest on this amount Tax free.
There are 2 different types of ISAs where you can put your money into. One is a cash ISA. The other is a stock and shares ISA.
In order to open an ISA you need to meet certain requirements:
-You must be 16 or over to open a cash ISA, 18 or over for a stocks and shares ISA.
-You need to be a resident in the UK.
-You are not able to hold an ISA on behalf of someone else.
There are a number of ways to open an ISA, they are available from a range of banks, building societies, credit unions, friendly societies and stock brokers.
When filing your self-assessment tax return, you do not need to declare and ISA interest or profits on it. You can save up to £15,240 in one type of account or you can split the allowance across both types.
Cash ISAs can include, Savings in bank and building society accounts and some national savings and investments products.
Stocks and shares ISAs can include, Shares in companies, unit trusts and investment funds, corporate bonds and government bonds.
If you withdraw funds from your ISA then your allowance will not reset, so for example if you invest all of your allowance in a cash ISA then take out £3,000 to buy a new car, you will not be able to invest the £3,000 back in as the allowance does not reset till the next tax year.
You can transfer the money from one ISA to another, if you want to transfer money you invest in an ISA this current year then you will have to transfer all of it, but for previous years, you are able to choose to transfer all or part of your savings.
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