ISAs Explained | Legal & General (2024)

FAQs

How does ISA work for dummies? ›

You receive an ISA allowance that is tax-free income that you can allocate to an ISA account each tax year. The allowance for ISAs is £20,000 and cannot be exceeded. You can put money into one of each type of ISA during each tax year, and the value of the ISA will increase depending on the type of ISA you open.

Putting money into an ISA

Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April. You can only pay into one Lifetime ISA in a tax year. The maximum you can pay in is £4,000.

You can pay into two ISAs in the same tax year provided they are different types of ISA. It would be fine to pay into both a cash ISA and a Stocks & Shares ISA in one tax year as long as you're below the £20,000 limit. You would not be able to pay into two different ISAs of the same type.

Best managed investment ISA for beginners

For those wanting to have a professional invest their ISA allowance for them and make strategic decisions then Wealthify is certainly worth consideration, especially as it has a minimum of just £1 meaning you can start small.

An ISA, or Individual Savings Account, is a savings account that you never pay any tax on. It does come with one restriction, which is the amount of money you can save or invest in an ISA in a single tax year – also known as your annual ISA allowance.

You can divide your ISA allowance across the four different types of ISAS – Cash, Stocks and Shares, Innovative Finance or Lifetime. Although the maximum amount you can put into a Lifetime ISA is £4,000 each tax year. The overall limit for ISA contributions in the 2024/25 tax year is £20,000.

ISA allowances are reset every tax year. This means you can't carry forward any unused allowance into the next tax year, so you have to 'use it or lose it'. A new allowance becomes available at the start of the next tax year. The current annual ISA allowance is £20,000.

1.1 Increase the age for opening cash ISAs from 16 to 18 years old and over. From 6 April 2024 it will not be possible for anyone aged 17 and under to subscribe to more than one cash ISA .

Which ISA is the best? ›

Your savings are safe in a cash JISA, though they're at risk in a stocks & shares JISA. If you opt for a cash junior ISA, your savings are protected the same way as they would be in a normal cash ISA. But if you choose a stocks & shares junior ISA, you're not protected from investment losses.

If you're a married couple, you can put up to £40,000 in ISAs between you. Tax-free. Be aware. You can choose how much or little of this £20,000 allowance you want to invest each year but do bear in mind, you can't 'carry it over' to the next year.

A fund might be a dud, a fund manager might leave, or you might not be willing to take as many risks as you once did. If you don't review your portfolio regularly, you could end up with a stocks & shares ISA losing money. Don't panic. Investments can go down as well as up.

You cannot open 2 cash ISA in the same tax year. You can open 1 and transfer the funds from another into the new one as long as you havent paid any funds into the existing one.

Within each financial year, you have the chance to save up the ISA allowance without paying any tax on the interest earned. The ISA allowance for the tax year 2023/204 is £20,000 and it will be the same for 2024/2025. As the allowance resets at the end of the tax year, if you don't use it, you'll lose it.

Maximise your contributions

So the more you can invest, the greater your money can grow. Contributing a small regular sum and choosing the right investments can soon grow your pot. But making sure you use your full ISA allowance per year is the only way to maximise your ISA's true potential.

ISAs are a tax-efficient way to save money. The government sets a limit for how much can be saved each financial year, and doesn't charge any tax on the interest/income you earn.