ISA rules and allowances: everything you need to know
Understand what the annual ISA allowance means for your money, how to get the most from it, and the ways other ISA rules work.
What is an ISA allowance?
The ISA allowance is the amount of money you can save and invest across your individual Savings Accounts (ISAs) in a single tax year. This annual ISA limit is set by the government and stands at £20,000 for the 2022/2023 tax year.
Under current ISA rules, you can save the full £20,000 each tax year in one of the following:
Stocks and Shares ISA
Innovative Finance ISA
What happens if I go over the ISA allowance?
If you make a payment into your ISA that pushes you over the annual allowance, your provider should simply reject it and return it to you. If this doesn't happen automatically, contact your provider or HM Revenue & Customs (HMRC).
Any interest or returns your savings and investments generate are tax free up to the £20,000 annual ISA limit.
What are the key ISA rules?
Can I pay into two different ISAs in the same year?
Do I have to declare any interest, income or capital gains I make on my ISA?
Is there an ISA age limit?
You need to be 16 to open a Cash ISA.
Under the Innovative Finance ISA and Stocks and Share ISA rules, the minimum age is 18.You can only open a Lifetime ISA if you're over 18 and under 40.
What are the ISA rules on death?
How do ISA withdrawals work?
Depending on how your account is set up, you should be able to request a withdrawal online, in person, or by phone. And you can take money at any point, without losing your tax benefits.Before withdrawing money from an ISA, consider the following:
Always check any terms and conditions, as ISA withdrawal rules and charges differ by provider.
- Accounts such as Lifetime ISAs and fixed-term Cash ISAs only allow you to withdraw money in specific circumstances. Charges may apply too.
ISA withdrawals can affect any returns you make on investments within a Stocks and Shares ISA.
With Stocks and Shares ISAs, you should be willing to keep your money invested for at least five years. This is because investing for longer periods can help to offset short-term fluctuations in investment performance.
Some providers may not allow you to replace an ISA withdrawal you've made in the same tax year.
ISA tax and charges
An ISA is a tax-efficient way to save and invest as:
any interest your money earns over time in a Cash ISA is tax free
you don't pay tax on any investment returns your might make within a Stocks and Shares ISA
if you sell investments within a Stocks and Shares ISA, you won't be taxed either