Know Your ISA

Your Guide to ISAs

ISAs explained

An Individual Savings Account (ISA) is a tax advantaged savings account which allows you to earn tax-free interest on the money you save. ISAs were first introduced in April 1999 and have become an integral way to save. The UK Government set the annual ISA limit each tax year, which currently stands at £20,000. The tax year starts on the 6 April and ends on the 5 April the following year. Your ISA allowance resets at the start of each new tax year.

To be eligible for the majority of ISAs, you must be 18 years old or over. Junior ISAs are available for younger savers under 18 years old. You must also be a UK resident for tax purposes. Crown employees, or those married or in a civil partnership with a Crown employee, may also qualify. Your Cash ISA must be held in your name only.

The savings protection works the same for cash ISAs as it does for normal savings. Provided your money is in a UK-regulated bank or building society account, £85,000 of it is protected under the Financial Services Compensation Scheme.

Different types of ISAs

There are four types of adult ISAs: Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA. You can save in a cash ISA, a Stocks and Shares ISA, a Lifetime ISA, an Innovative Finance ISA, or any combination of the four, as long as you do not exceed the annual limit. The Lifetime ISA has its own subscription limit of £4,000 per year which forms part of the overall £20,000 limit.

New rules introduced on the 6 April 2024 mean you can now pay into multiple ISAs of the same type, with different providers, within the same tax year (except for Lifetime ISAs and Junior ISAs) – e.g., two cash ISAs.


Cash ISA

Cash ISAs tend to be the most common type of ISA. You can usually choose between a Fixed Rate ISA, which has a consistent interest rate for a set amount of time, or a Variable Rate ISA, where the interest rate can change.


Stocks and Shares ISA

A stocks and shares ISA is a tax-efficient way to invest in the stock market. If you are aged 18 or over, you can use all or part of your annual ISA allowance to invest in a stocks and shares ISA. You can invest in funds (shares or bonds from various companies pooled into one investment), bonds (basically a loan to a company or a government), and shares in individual companies. You don’t pay dividend, capital gains or income tax on any gains or income from investments held in your stocks and shares ISA. As with any other investments, this product comes with risks. The value of your investments can go down as well as up. It’s essential to understand the risks involved and advisable to seek independent financial advice if you are thinking of investing in a stocks and shares ISA.


Innovative Finance ISA

Innovative ISAs, also known as IFISA tend to be the least common type of ISA. The money invested in the IFISA is loaned out to borrowers or businesses, also known as peer-peer lending. You receive interest for lending your money out and this interest is paid tax free. It comes with some risks, these include, the money invested into an IFISA is not protected as it is with the other types of ISAs. This means you may lose some or all of your investment. Also there might be a delay if you want to withdraw from the IFISA. This is a specialised type of ISA, and it is recommended that you seek independent financial advice, if you are considering opening an IFISA.


Lifetime ISA

Lifetime ISAs (LISA) replaced the Help to Buy ISA, which is no longer available to open. A LISA can be opened by anyone aged between 18 and 39. A LISA can be a cash ISA or a stocks and shares ISA. You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000 or for retirement. The UK Government adds a bonus of up to £1,000 each tax year. The maximum you can save into a LISA is £4,000, but you can open another ISA and pay into that, up to the annual ISA allowance. E.g., if the current annual ISA allowance is £20,000 and you put £4,000 into a LISA, you can invest a further £16,000 into another ISA in the same tax year.

LISAs have specific criteria on how the money can be used and you can find out more here Lifetime ISA – GOV.UK (

Case Study – Rosie and Jamie

Rosie and Jamie found their ‘dream home’ and knew they needed to act fast in order to secure it.  They had been planning their move carefully for quite some time and already had their ‘Decision in Principle’ from Chorley Building Society. Rosie had saved in her ‘Help to Buy ISA’ for the last 7 years and was able to use the additional 25% bonus from the Government.

Rosie commented: “The bonus that we received provided us with an additional £2500 towards our deposit.  That really did make such a difference to us.  The process was quite straight forward and was handled by the Chorley and our conveyancers predominantly so there was no extra stress! It’s extremely rare to get money for nothing so I would highly recommended any first time buyer to open an account!’


Junior ISA

A Junior ISA is a tax efficient way to save for younger savers, aged under 18. A Junior ISA can be a cash ISA or a stocks and shares ISA. The maximum amount that can be paid into a Junior ISA is currently £9,000 per tax year. Money deposited into a Junior ISA is permanently tax-free. This means that any interest earned on the savings is not subject to income tax. If you hold a Stocks and Shares Junior ISA, you won’t pay dividend, capital gains or income tax on any gains or income from investments held within the ISA. The child cannot access the account until their 18th Birthday, once they reach 18 the account becomes their own and the child can access the money.


Transferring ISAs

You can move your ISA to a new provider at any time, but different rules apply to ISAs therefore, it is essential that you don’t withdraw the cash yourself to do the transfer. You must complete an ISA Transfer Authority form with the new provider, this is to make sure the tax-free status is protected.

Not all providers accept transfers therefore you must also check with the provider before going ahead.

You can also switch between the three main ISA types – cash ISAs, stocks & shares ISAs, and IFISAs. You can choose to transfer all or part of the balance, this includes subscriptions made in the current tax year.

Some ISAs may apply a fee or a penalty for transferring your ISA from your current provider. If you transfer from a fixed rate ISA, you may incur a penalty of between 30- and 365-days’ worth of interest. You may be charged an exit fee from transferring from a stocks and shares ISA, usually around £25 – £30.  Extra restrictions and or penalties may apply if you transfer from an IFISA, so it is important to check with the provider first. If you transfer cash and assets from a LISA to a different type of ISA before the age of 60, you’ll have to pay a withdrawal fee of 25 per cent.

If you want to switch ISAs, contact the provider you want to move to and fill out an ISA Transfer Authority Form.

Most Banks and Building Societies offer one or all types of ISAs. Interest rates vary between providers and different product terms and conditions apply.

Chorley Building Society has a great range of ISA savings products for everyone, from young children to older savers. We offer Cash ISAs and Junior Cash ISAs. We have fixed and variable cash ISAs, easy access, and notice ISAs.


You can view our range of ISAs and other savings products here. You can speak to our friendly Savings team on 01257 230 003.