Since they were first introduced in 1999, ISAs have evolved quite significantly. The ISA allowance has grown a lot, Junior ISAs for kids were introduced, some variations on ISAs have come and gone (Help to Buy, but who also remembers Mini and Maxi ISA?) and they’ve got flexible. Here we look at the types of ISAs available today
This is the really simple one – a cash savings account that comes with the benefit of not having to pay any tax on interest. You can pay up to £20,000 into a cash ISA every year. Some are instant access while others have fixed terms.
Stocks & Shares ISAs have really opened up investing to pretty much everyone. They’re simple accounts that you can usually set up and manage online and they give you access to a variety of investments (exactly what you get depends on the ISA provider). As with a cash ISA, you can invest up to £20,000 a year in a Stocks & Shares ISA and any gains you make will be tax free. But remember that investing is riskier than keeping your money in cash because investments can go down in value and you can end up with less money than you started out with.
A relatively new kid on the block, the Lifetime ISA was introduced in April 2017 with the aim of helping young people buy their first home or save for retirement. You can choose between a cash or Stocks & Shares ISA. While Lifetime ISAs are more complicated than regular ISAs, they come with some interesting benefits.
Innovative Finance ISAs (which also go by the snappy abbreviation IFISA) were introduced in 2016 to allow people to invest in peer-to-peer lending within a tax-free ISA. With peer-to-peer lending, you are lending your money directly to borrowers in return for interest so your ISA will contain peer-to-peer loans.
These are ISAs for kids. You can choose from a cash or a Stocks & Shares ISA and invest up to £9,000 a year. The account has to be opened by a parent or guardian but once it is open, anyone can contribute. The money can’t be withdrawn until a child turns 18, at which point we’ll be in touch about converting it from a Junior ISA to a fully-fledged ISA.
Bestinvest offers Stocks & Shares ISAs. We don’t offer Cash ISAs, Lifetime ISAs or Innovative Finance ISAs.