There are many ways that you can save or invest. Individual Savings Accounts (ISAs) are an effective means of shielding your money from both Capital Gains Tax and Income Tax. To utilise your ISA allowance, you should make use of it before the deadline at midnight on Monday 5 April 2021, the end of the 2020/21 tax year.

Each tax year, we are given an annual ISA allowance. This can build up quickly, letting you accumulate a substantial tax-efficient gain in the long-term.

The ISA limit for 2020/21 is £20,000. The proceeds are shielded from Income Tax, tax on dividends and Capital Gains Tax. To utilise your ISA allowance you should do so before the deadline at midnight on Monday 5 April 2021.

We’ve answered some typical questions we get asked about how best to use the ISA allowance to help make the most of the opportunities as this tax year draws to a close.

Q: What is a Cash ISA?
A: Cash ISAs are savings accounts that pay interest that is free of income tax. There are various types of cash ISAs – easy access, regular or fixed term – that retain your money in cash and pay a pre-defined amount of interest / fixed income.

Q: What is a Stocks & Shares ISA?
A: A Stocks & Shares ISA allows you to invest for example in a wide range of shares, funds, investment trusts and bonds free from capital gains and income tax.

Q: Can I have more than one ISA?

A: You have a total tax-efficient allowance of £20,000 for this tax year. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, or any combination of the three) cannot exceed £20,000. There is also a Lifetime ISA (or LISA) the maximum contribution is £4000 in a year.

You can have as many ISAs of each type as you wish, but your total accumulative contribution can’t exceed £20,000 this tax-year. If you save up to this limit and withdraw i.e. £1000, you cannot put £1,000 back in until the next tax year. Investors can also only pay into one of each type of ISA each year.

Q: When will I be able to access the money I save in an ISA?

A: You can take money out of your Cash ISA but how much, and how often, depends on which type of ISA you have. If your ISA is ‘flexible’, you can take out cash then put it back in during the same tax year without reducing your current year’s allowance. Your provider can tell you if your ISA is flexible.

Stocks & Shares ISAs and Innovative Finance ISAs don’t usually have a minimum commitment, which means you can take your money out at any point. That said, it is prudent to be able to invest for a longer-term/period to curtail market risk. That said, it prudent to be able to invest for at least 5 years to curtail market risk and increase the likelihood of a good return. However, the value of investments can go down as well as up and you might get back less than you invested.

Crucially you can take your money out of an ISA at any time, without losing any tax benefits but you should check the terms of your ISA to see if there are any rules or charges for making withdrawals.

There are different rules for taking your money out of a Lifetime ISA.

Q: Can I take advantage of a Lifetime ISA?

A: You’re able to open a Lifetime ISA if you’re aged between 18 and 39. You can save up to £4,000 each tax year, every year until your 50th birthday. The government will pay an annual bonus of 25% (capped at £1,000 per year) on any contributions you make. You can withdraw money from your Lifetime ISA if you are buying your first home, aged 60 or over or are terminally ill, with less than 12 months to live. There will be a withdrawal charge if cash or assets are withdrawn for any other reason.

Q: What is an Innovative Finance ISA?

A: An Innovative Finance ISA allows individuals to use some or all of their annual ISA allowance to lend funds through the Peer-to-Peer lending market. Peer to Peer lending allows individuals and companies to borrow money directly from lenders. The borrower pays back the borrowed amount and the interest they pay is the return an investor gets on their investment; this interest is tax-free. Capital and interest may be at risk in an Innovative Finance ISA and your investment is not covered under the Financial Services Compensation Scheme.

Q: What is a Help to Buy ISA?

A: A Help to Buy ISA is a government scheme designed to help you save for a mortgage deposit to buy a home. The scheme closed to new accounts at midnight on 30 November 2019. If you have already opened a Help to Buy ISA (or did so before 30 November 2019), you will be able to continue saving into your account until November 2029.

Q: I already have ISAs with several different providers. Can I combine them?

A: Yes you can, and you won’t lose the tax-efficient ‘wrapper’ status. Consolidating your ISAs may also substantially reduce your paperwork. We’ll be happy to talk you through the advantages and disadvantages of doing it. Not all providers will accept ISA transfers, so check with your new supplier before agreeing to switch. Also check if there is a fee for transferring.

Q: Can I transfer my existing ISA?

A: Yes, you can transfer an existing ISA from one provider to another at any time as long as the product terms and conditions allow it. If you want to transfer the money you’ve invested in an ISA during the current tax year, you must transfer all of it. For money you invested in previous years, you can choose to transfer all or part of your savings. Doing this doesn’t use up any of your current years ISA allowance.

Q: What happens to my ISA if I die prematurely?

A: If you die, the money and investments you hold in an ISA will be passed on to your beneficiaries. After your death, your ISA will retain its tax benefits until one of the following occurs – the administration of your estate is completed, or the ISA is closed by your beneficiary. Otherwise, the ISA provider will close the ISA 3 years and 1 day after the investor’s death. There will be no Income Tax or Capital Gains Tax to pay up to that date, but ISA investments will form part of the estate for Inheritance Tax purposes.

For stocks and shares ISAs the ISA provider can be instructed to either sell the investments and pay the proceeds to the administrator or beneficiary of the estate, or transfer the investments to the surviving spouse or civil partner’s ISA – but this is only possible if they have the same ISA provider as the investor.

Q: What is a Junior ISA and how do they work?
A: A Junior ISA is a long-term savings account set up by a parent or guardian with a Junior ISA provider, specifically for their child’s future. Only the child can access the money, and only once they turn 18. There are two types available – a Cash Junior ISA and a Stocks & Shares Junior ISA.

The current annual subscription limit for Junior ISAs is up to £9,000 for the 2020/21 tax year. The fund builds up free of tax on investment income and capital gains until your child reaches 18, when the funds can either be withdrawn or rolled over into an adult ISA.

More information in relation to all of the matters described above is available on

Tax-efficiency is a key consideration when investing because it can make such an enormous difference to your wealth and quality of life. If you want to understand more about our ISA options please contact us.


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The content in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.