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Individual Savings Accounts (ISAs)


On the 6th April 1999, the Government introduced Individual Savings Accounts, or ISAs, as a method of saving your money in a tax-free environment.

Any money that you pay into an ISA will earn you a certain rate of interest or growth. However, unlike many forms of savings accounts, the government does not tax the interest or growth that you earn from your ISA.

There are two main types of ISA available, Maxi and Mini ISAs.

Anyone applying for an ISA can have either one Maxi ISA, or up to three different Mini ISAs in any one tax year (6th April to the 5th April the following year), and can invest up to £7000.00 in the ISA in the same year.

ISAs offer three different components for you to either save or invest your money into. These components are:


There are strict guidelines regarding the maximum amount that you can invest in each component, and depending on whether you apply for a Maxi or Mini ISA.

In order to have a mini cash ISA, you must be aged 16 or over. In order to have any other type of ISA, you must be aged 18 or over.

Maxi ISAs

In a Maxi ISA, you may invest in up to three different components if you wish. You can invest in up to three different components in one account, and can invest different amounts in each component, providing you do not exceed the maximum limits. These are:

A Maxi ISA has to have a Stocks and shares component. If you do take out a Maxi ISA, then you will not be allowed to take out any Mini ISA’s in the same tax year.

Mini ISAs

In a Mini ISA, you may invest in only one component per Mini ISA, but you can open up to three Mini ISA’s in the same tax year (one for each component). You can invest different amounts in each Mini ISA providing that you do not exceed the maximum limits. These are:

If you have a Mini ISA, then you will not be allowed to take out a Maxi ISA in the same tax year.


So, what’s the difference between Stocks and Shares and Cash?

Putting your money into the cash component of an ISA is very similar to putting your money into a bank or building society savings account, and you will receive a rate of interest from the money that you have in the cash part of an ISA.

By putting your money into the Stocks and shares part of an ISA, you are placing your money on the stock markets. This means that the money you have can either increase in value, or decrease in value, depending on how the stock markets perform. This can be a fairly risky business, and you may get back less money than you originally paid in.

In the long term, stocks and shares may get a better return for your money than a deposit based savings account, but this cannot be guaranteed. The risks involved with these types of investment should take a lot of careful consideration before you go ahead, and you should consider getting some financial advice before you sign on the dotted line.

Please keep in mind that there is a risk of you losing money by investing into any stock market investments, and these types of investment are seen to be for a medium to long term investment (around 5-15 years). Only go into these investments if you are happy that you understand the risks involved. If you are unsure, you should think about getting some independent financial advice.

How to choose an ISA

When choosing an ISA, you should carefully consider the following points:


You should also check whether the ISA being offered is a ‘CAT standard ISA’. CAT stands for Charges, Access, and Terms. These standards were introduced by the government to help you identify which ISA products offer a fair deal. A CAT standard ISA should offer reasonable charges, easy access, and fair terms.

However, these CAT standards do not guarantee the performance of an ISA, nor do they mean that the government recommends the ISA, or that it is necessarily suitable for you.


Disclaimer,   Target Audience,   Jurisdiction    Last updated & checked: 30/03/2006