An ISA or Individual Savings Account is a savings or investment account you do not pay tax on. This means any interest or dividend you earn on your savings or investments is tax-free. ISAs are open to adults living in the UK, and this tax year (2020-21), you can save or invest up to a maximum of £20,000. There is a new ISA limit every tax year, although it has remained unchanged since 2017. The tax year starts on the 6th of April and ends on the 5th of April the following year.
If you do not live in the UK and would like to open an ISA, you must be a Crown servant (for example, diplomatic or overseas civil service) or their spouse or civil partner.
1. If you want to save or invest more than £20,000 or if you prefer to save in a non-ISA, ask your provider for the non-ISAs they offer. You'll also enjoy tax benefits on non-ISAs up to a limit, after which you'll have to pay taxes on any returns you make. For example, when you save in a standard savings account (non-ISA), basic-rate (20%) taxpayers will earn up to £1,000 interest tax-free every year. Higher-rate (40%) taxpayers will earn up to £500. Additional-rate (45%) taxpayers have no tax-free allowance. Investing has different tax rules, read our Stocks and Shares ISA guide for more information.
2. There are also ISAs for kids. They are called Junior ISAs or JISAs, and like an adult ISA, they are tax-free. Family and friends can put up to £9000 into the account on behalf of the child in this tax year (2020-21). JISAs are available to children under 18 living in the UK.