Do you know your ISA myths from your ISA truths?

Myths and misconceptions about ISA-1085x412-Dt.jpg

ISA general

Wrong! The main types of ISA are:

  • Cash ISA – works like a savings account, but with no tax to pay on the interest earned
  • Stocks & Shares ISA – allows investments in shares, funds and bonds with no tax to pay on dividends or capital gains
  • Innovative Finance ISA – allows investments in peer-to-peer lending with no tax to pay on the interest earned
  • Help to Buy ISA – a type of Cash ISA specifically for first-time home buyers
  • Lifetime ISA – savings account or stocks & shares investments that can be used only for first-time home purchases or retirement

Learn more

Wrong!  You can put money into one of each type of ISA each tax year, as long as overall you do not exceed your annual ISA allowance of £20,000.  Also, transferring ISAs from previous tax years does not affect your allowance for the current tax year. Learn more 

Wrong!  Any interest earned via an ISA is tax free not only in the current year, but also in future years, and has no bearing on any other tax allowances you may be entitled to.  Also, ISAs do not need to be disclosed on HMRC tax returns, so ISAs make life a little simpler too. Learn more

Wrong!  Most Innovative Finance ISAs, Stocks & Shares ISAs and some Cash ISAs allow you to access your money when you need to.  Flexible ISAs, like RateSetter’s Innovative Finance ISA, allow you to replace any money you withdraw within the same tax year without it affecting your ISA allowance for that year. Please note there may be fees for early access.  Learn more

Wrong - it doesn’t have to be complicated or time-consuming!  The best ISA providers keep it simple to open an account and make operating your account easy too.

Wrong!  Many ISAs can be opened with a small amount of money – for example, you can open an Innovative Finance ISA with RateSetter with just £10.  Most ISAs allow you to top up your pot throughout the year.