With an Individual Savings Account (ISA), all the interest you earn is tax-free. Find out more about how much you can save in a cash ISA and make to most of your tax-free savings allowance.
ISA stands for ‘Individual Savings Account’
An ISA is a tax-free savings account for UK residents aged 16 or over. The Government initiated the ISA scheme to encourage people to save.
With an ISA, all the interest you earn is tax-free but there's a limit on how much you can pay in each tax year - see below for this tax year’s annual ISA allowance.
You may open an ISA if you’re aged 16 or over and resident in the UK.
ISAs are 'individual' so you can't open an ISA as a joint account.
For under 18s, you can open a junior ISA. Young people aged 16 and 17 can have both an ISA and junior ISA.
If you're 16 or over and live overseas, you can open an ISA if you're a Crown servant (e.g. diplomatic or overseas civil service) or their spouse or civil partner.
The interest is 'tax-free’ –
this means it doesn’t count towards your Personal Savings Allowance
If you're a UK tax-payer, you have to pay tax on any interest you earn over your Personal Savings Allowance. For more details, visit the Government's website www.gov.uk and type 'personal savings allowance' in the search box.
As well as the tax-free interest, there are other benefits to having an ISA - for example, when you die, your spouse can inherit an additional ISA allowance equal to your ISA savings.
You can split your ISA allowance between the different types of ISA
The different types are cash, stocks and shares, innovative finance and lifetime. Help to Buy ISAs are a type of cash ISA.
The rule is that you can only save in one of each type per tax year.
No matter how you decide to save in different ISAs, you’re not allowed to save more than your annual ISA allowance.
You’re never tied into an ISA. If you open an ISA, you’ll always be able transfer your savings to a different one. This is true even if your ISA is fixed rate - just make sure you check the terms and conditions, in case, for example, there’s a notice period or charge.
To find out more about ISAs, go to the Government’s website, www.gov.uk and type 'ISA' in the search box).
For the tax year ending 5 April 2018, the annual ISA allowance is £20,000.
For junior ISAs, the allowance is £4,128.
If your ISA is ‘flexible’, you can take money out and put it back in later, without it counting any further towards your annual ISA allowance - as long as you pay the money back in before the end of the same tax year.
You can pay into your Coventry ISA in the usual ways
Depending on the Specific Terms of your Coventry ISA, you can pay in money in the usual ways:
Paying into your account
With an ISA you can also ask to make an 'ISA transfer'. This is a special way to move ISA savings from another ISA into your Coventry ISA without the money losing its tax-free status. You can do this online when you open the ISA, or call us or ask at any branch and ask us for an 'ISA transfer'.
It’s easy to keep track of your ISA savings
You must make sure you don't pay in more than your annual ISA allowance. If you accidentally make a payment which takes your balance over the annual ISA allowance, we automatically return the whole payment.
If you don't pay into your Coventry ISA for one tax year or more, it becomes 'inactive'
Under HMRC rules, an ISA will become 'inactive' at the end of the tax year if you haven't paid in any money which counts towards your annual ISA allowance during that tax year.
If you'd like to use your ‘inactive’ Coventry ISA for your current year's ISA allowance (and the account terms allow it), we'll need to re-register it for you. Contact us to find out what's possible, and to re-register if applicable.
The money saved in the inactive ISA continues to earn interest. If the inactive ISA is flexible, you can still take money out of your previous years' ISA savings, and pay back in up to your flexible ISA allowance.
It's fine to have one or more inactive ISAs (with us or any providers) but it's sensible to regularly review your savings. You might be better off if you transfer your ISA savings to a new ISA with a better rate or better terms.
If your partner dies and they had ISA savings, you inherit an ‘additional allowance’ (or 'permitted subscription')
When someone dies, their ISA savings lose their tax-free status and they become part of that person's estate. ISA rules changed in 2015 so if your spouse or civil partner dies, you now gain an extra ISA allowance equal to the amount your partner had saved in an ISA (or ISAs) plus any interest earned.
This applies to anyone whose spouse or civil partner died on or after 3 December 2014. Any allowance you inherit this way is in addition to your personal annual ISA allowance.
This extra allowance is available for three years after the date of death, or 180 days after administration of the estate is completed, whichever is later. The allowance has to be given to you by the same provider the ISA savings were held with. You can take advantage of this extra tax-free allowance by paying into a suitable ISA in one lump sum, or in multiple deposits over the allowed time period.
The special ISA accounts for this type of savings are usually known as 'additional permitted subscription ISAs'. If you decide to take advantage of this tax-free way to save, you must pay into an ISA with your late partner's ISA provider.
When the account has been opened, and the money paid in, you can transfer to a different provider that accepts additional allowance transfers. At the Coventry, we don't accept additional allowance transfers from other providers.
If you've recently lost your husband, wife or civil partner, and they had a Coventry ISA(s), please contact us and we'll explain how it works.
Some useful links…
If you can't find what you need on our website, contact us.
You might also find these websites helpful:
The Government's website has clear and comprehensive information about ISAs, the rules and allowances (type 'ISA' in the search box):
MoneySavingExpert has a full guide to ISAs (type 'isa' in the search box):
Which? magazine gives advice and has handy comparison tools: