An ISA (or Individual Savings Account) may seem confusing but it's simply a tax-free savings account. That means you don’t pay income tax on the interest your savings earn. Here's some useful information, explaining all you need to know about ISAs.
You can only put a certain amount of money in an ISA each tax year. This is called an ISA allowance.
The ISA allowance for the 2019/20 tax year is £20,000.
You can use your ISA allowance right up until the end of the tax year - midnight on the 5th April. You can put the full amount in up until the last day of the tax year, and then the new allowance will begin on the first day of the new tax year.
You can also split your ISA allowance between different ISAs, but you can only pay into one of each type of ISA per tax year.
An ISA can be "flexible". This means that you can take money out of your ISA and replace it without using up more of your annual ISA allowance.
If your ISA isn't flexible, all deposits will count towards your annual ISA allowance, even if you've withdrawn money from your ISA at some point.
Leeds Building Society doesn't offer flexible ISAs.
Unless you have a flexible ISA, withdrawing money won't give you back any of your ISA allowance. For example, if you deposited £10,000 and then decided to withdraw £200, you'll still have used £10,000 of your ISA allowance. So any amount you take out of your account would lose its tax-free benefit.
If you have a fixed rate ISA, there may be limits on how many withdrawals you can make from it in a year. Check the terms and conditions of your ISA to find out if and how often withdrawals are permitted.
You will usually have a few options when your ISA matures, depending on your provider and your specific savings product. Standard options are moving the funds in your ISA to:
You won't necessarily have all of these options. Again, it depends on your provider.
When your ISA matures, you can move all of the money in it to a new ISA. As long as the money you're moving is from a previous tax year, this won't count towards your annual ISA allowance, even if you have more money in your ISA than the allowance limit.
You can transfer your ISA to another provider as long as they accept transfers. To do this, you need to open your new ISA and fill in an ISA transfer form. The rest of the process is arranged between your current ISA provider and your new one.
If you want to transfer money you've put into your ISA that year, you have to transfer all of it. This is because you can only pay into - or "subscribe to" - one ISA per tax year. By moving all of the money you've paid into your ISA that year, you move your whole subscription.
If you want to transfer money you paid into your account in previous years, you can choose to transfer only some of it.
The Personal Savings Allowance (PSA) lets you earn up to £1,000 in interest tax-free, if you're a basic-rate taxpayer.
The PSA applies to all savings accounts, not just ISAs.
The amount of tax-free interest you can earn is dependent on your tax rate. If you're in the higher 40% tax band you can earn £500 in savings interest tax-free. If you're in the additional 45% tax band you won't have a Personal Savings Allowance.
Whatever tax band you fall into, the interest on an ISA is completely tax-free. The tax-free interest from your ISA doesn't count towards your PSA.
If your total taxable income is less than £17,500, you don't pay tax on savings interest anyway.
Learn more about the Personal Savings Allowance.
You can leave your ISA open if you move to another country. You won't be able to pay any more money into the ISA, but you'll still get tax-free interest on your savings.
Do you know how much you can put in a Cash ISA each tax year, or what the difference between a fixed and variable rate is? Don't worry, we're here to answer some common questions.
You may be wondering – what even is a Cash ISA? In simple terms, it's a savings account where can earn tax-free interest*. If you’re over 161, you can open one and save up to £20,000 a year tax-free2.
We offer a range of different Cash ISAs, for different savings ambitions or needs.
For example, there are variable rate options providing easy access to your money or fixed rate options where you get a guaranteed rate of interest for a set amount of years. Take a look at all of our Cash ISAs.
*The tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.
1Cash ISAs are available to individuals aged 16 or over who are resident in the UK for tax purposes.
2Tax-free means that interest payable is exempt from income tax.
We offer two primary types of Cash ISAs:
Fixed rate Cash ISAs give you a fixed interest rate for a fixed amount of years. We offer fixed term Cash ISAs that last from one to three years. A fixed rate Cash ISA could be a good option if you don’t think you'll need to access your money for the length of your fixed rate term. You’ll have the peace of mind of a fixed interest rate, but you'll lose out on an amount equivalent to a certain amount of interest if you make a withdrawal.
Variable rate Cash ISA interest rates can go up or down. With this type of Cash ISA, you'll usually be able to access your funds without any penalty.
Cash ISAs are a simple type of savings account, but there are a few key things to know about opening one:
Take a look at all of our Cash ISAs or find out more about how Cash ISAs work..
The main benefit of saving or investing with Cash ISAs is because of their tax advantages. But there are a number of other reasons to take Cash ISAs into account:
3Tax-free means that interest payable is exempt from income tax.
4The tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.
Ready to open up a Cash ISA with us? There are three ways you can do it:
Not all the above options apply to every one of our Cash ISA accounts. However, you can apply online for most of our Cash ISAs. Click 'Get Started' on your chosen account to begin your application. If you need any help, feel free to contact us5.
5We may monitor and/or record your telephone conversations with the Society to ensure consistent service levels and for colleague training purposes.
Any Cash ISA account you open with us is protected by the FSCS. The FSCS covers a maximum of £85,000 per building society, bank or credit union, meaning there's a safety net in the unlikely event that anything ever happens to us or your money.
Our Cash ISA interest rates are changing all the time. Our Cash ISA savings accounts have different rates attached to them depending on the type of account (i.e. fixed or variable rate) and the access rules around withdrawing money.
You'll generally find better interest rates with our fixed rate Cash ISAs, but you'll have limited access to your funds for the duration of your term. Our instant and easy access accounts come with variable interest rates that can change while you hold the account.
Use our Cash ISA comparison table to get an idea of the type of interest rates available on our range of accounts.
Choosing the right Cash ISA for your needs is important. Our fixed rate Cash ISAs offer a better interest rate than our variable rate cash ISAs, but you'll have better ease of access with our variable accounts. You can find out more about our fixed rate and variable Cash ISAs by comparing the full range.
There are some reasons you may be charged on your Cash ISA:
You certainly can! Many of our Cash ISAs are available to apply for online – simply find the account that suits you best on our Cash ISA comparison table and click 'Get Started' to begin your application.
Of course, our Cash ISAs aren't the only savings account option that might suit you. Compare our full savings range to see if there are any of our other accounts that work for you.
Allow us to give you a quick introduction to Fixed Rate Cash ISAs.
Standard tax-free savings accounts. The features of a Cash ISA can vary, just like any other kind of savings account.
These ISAs work like Cash ISAs, except you're investing your money rather than putting it in a savings account. That means the value of your Stocks and Shares ISA can go up or down, depending on what happens to your investment. But any interest you do earn from a Stocks and Shares ISA is tax-free.
If you're not sure if this type of ISA is right for you, it's best to speak to a Financial Adviser.
Designed to help first time buyers save up a deposit to buy their first home. You can save up to £200 per month in a Help to Buy ISA (there's no minimum monthly deposit), with an initial deposit of £1,000.
Then, when you put a deposit on a property, the government will match 25% of what you've saved, up to a limit of £12,000.
That means if you save £12,000, the government will contribute an additional £3,000.
If you're buying a property with other people, each one of you can open a Help to Buy ISA. They're limited to one per person, not one per property.
This can be used like a Help to Buy ISA or to save for retirement.
The government will match 25% of your Lifetime ISA savings. For example, If you save £4,000 each year, the government will give you an annual bonus of £1,000. You'll receive the bonus either when you put a deposit down on your first home or when you turn 60.
These ISAs let you save with peer-to-peer lenders. They usually offer high interest rates, but may be seen as risky. Any losses to your savings aren't covered by the Financial Services Compensation Scheme.
Junior ISAs allow parents to save money tax-free for their child. The Junior ISA allowance is £4,128.
The child gets control of the money in their Junior ISA at 16. When they turn 18, the account turns into a Cash ISA.
This is essentially a second ISA allowance for people who have lost their wife, husband or civil partner. It is equal to the value of the deceased's ISA on the date of their death.
With an inherited ISA, you inherit the ISA allowance, not necessarily the money that's currently in the ISA. If your spouse donated the funds in their ISA to a charity, for example, you would still be entitled to an additional ISA allowance per tax year.
You have three years from the date of their death to apply for an Inheritance ISA.
The Inherited ISA allowance is also known as an additional permitted subscription.
This guide is intended as a summary only and does not constitute legal or financial advice by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions. We recommend that you seek legal and/or financial advice if you have any questions or queries.
Last updated: 14 September 2023.
Your eligible deposits with Leeds Building Society are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. This limit applies to the total of all deposits held in a Leeds Building Society account in the UK. Any deposits you hold above the limit are unlikely to be covered. Please click here for further information or visit www.fscs.org.uk.
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