Savings, Money, Finance, Specialist

Individual saving accounts

Individual saving accounts or ISA are a tax-free savings scheme designed by the UK government to encourage people to save money.

Any savings growth or interest earned on money in an Individual saving account is free from tax but there are a few rules governing contributions.

Under UK Isa rules, an indevidual can invest up to £7,000 maximum in any tax year (which from April to April), completely free of tax.

There are two main components on offer - cash and shares - and exactly how that £7,000 is broken down is up to the individual concerned.

A mini Isa enables savers to split up their money. You can have a mini for both parts of your Individual saving account with the same provider or two different ones. The limits are £3,000 in cash and £4,000 in shares.

Alternatively, you can invest £7,000 a year free of tax in a equities or share maxi Isa.

You are not allowed to invest in both a mini cash Isa and a maxi stocks and shares Isa in the same tax year, so you would need to wait until next year before you can put money into a maxi if you have already put money into a mini.