How Much Cash Can an Individual Invest in an Individual Savings Account (ISA) in Any Year?
An ISA (Individual Savings Account) is a financial product available to citizens of the United Kingdom. It provides an opportunity for the individual to invest and save without having to pay tax on the interest and capital growth attained. There are two types of ISA: Stocks and Shares ISA and Cash ISA. Individuals over 16 years can invest in a Cash ISA while those over 18 can invest in one or both types. Each has investment limits set by the UK government.
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Allowance
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The ISA limits for the 2010/2011 tax year (the tax year runs from April 6th or the nearest working day after to the following April 5th) are £5,100 for a Cash ISA and £10,200 for a Stocks and Shares ISA. When combined, however, the ISA allowance is £10,200. Thus, if you invest the maximum allowed in a Cash ISA you can only invest the same amount in a Stocks and Shares ISA. From the 2011/2012 tax year, the allowance for ISAs will rise in line with inflation of the UK economy.
Deposit
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You can invest the maximum allowance into one or both of your ISAs in as many deposits as you want during the tax year. If you have the available funds, it is most beneficial to invest the maximum amount at the start of the tax year. This gives you the maximum potential for earning interest over 12 months, allowing for products with variable interest rates and the performance of the stock market.
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Withdrawl
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You are permitted to withdraw any or all of your investment in either ISA at any point (or points) during the tax year. However, if you do make a withdrawal, the amount you take out is still considered part of your ISA allowance. So, for instance, if you have used the maximum allowance and then decide to make a withdrawal, you cannot make any more deposits during the tax year.
Terms and Conditions
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You can only invest in one Cash ISA and one Stocks and Shares ISA each tax year, up to the limits outlined above. If you don't invest the maximum amount allowed in each ISA, you cannot invest the difference in another one. You are able to move investment from a Stocks and Shares ISA to a Cash ISA, but cannot move it the other way. Financial institutions set their own interest rates for their ISA products, they are not obliged to follow the Bank of England base rate. It is, therefore, a good idea to research the rates being offered prior to committing your capital.
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