Video Transcript – ISAs

In the long-term, when you have a good paying job and more money in savings and investments you are likely to end up being liable to pay income tax and capital gains tax on your savings and investments.

To reduce that tax burden, you can use an Individual Savings Account (ISA) which can be either a cash or stocks and shares ISA or you can have both. You are allowed to save and/or invest up to £20,000 tax free. The tax-free benefit applies for ever so over the years you can accumulate savings and investments worth hundreds or thousands of pounds that are not subject to income tax and capital gains tax. So, in the long-term it can be a major benefit.

In the future Parliament might change these rules and remove or reduce the benefit though. If you have a LISA (see point 3 above), the £4,000 you can put into the LISA counts towards your £20,000 limit so you have up to £16,000 a year to put into other types of ISAs. Again, the limit of £20,000 applies per tax year, not per calendar year. For more information, see here: https://www.gov.uk/individual-savings-accounts/how-isas-work.