A GUIDE TO SAVING AND INVESTING IN ISAs

HOW MUCH CAN I SAVE OR INVEST IN AN ISA?

The maximum amount you can put into a stocks and shares ISA in the 2010/11 tax year is £10,200.

The maximum amount you can save in a cash ISA in 2010/11 is £5,100.

So, assuming you have the maximum annual allowance of £10,200 to invest in 2010/11, you can choose to put all that investment into a stocks and shares ISA, or you can split it between a stocks and shares ISA and a cash ISA. For example, £5,100 in a cash ISA and £5,100 in a stocks and shares ISA, or £3,000 in a cash ISA and £7,200 in a stocks and shares ISA.

You can invest up to the maximum ISA allowance, either as a lump sum or by making regular payments into your ISA(s) (for example, £50 per month). Your ISA manager will be able to tell you what the minimum amount is that you can invest.  If the ISA meets the Stakeholder standards, the minimum will not be higher than £10 per month in a Cash ISA and £20 per month in a stocks and shares ISA (see below: What is a Stakeholder ISA?).  

CAN YOU WITHDRAW MONEY FROM YOUR ISA?

Yes. You can withdraw as much money as you wish from your ISA and at any time, subject to the terms and conditions of the ISA. It is important to note that if you do this you will not be able to put the same amount back in the same tax year.

For example, if in 2010/11 you invest £9,000 in a stocks and shares ISA and then withdraw £2,200, you would be able to put only £1,200 back in, as this takes you up to the maximum contribution limit for the year of £10,200.

Money withdrawn will not be taxed. 

WHERE CAN YOU OPEN AN ISA?

You can open an ISA at your local high street bank or building society.  Many fund management companies offer a range of ISA products. You can also approach financial advisers, insurance companies and fund supermarkets about the ISAs they offer.

It is also possible to open many ISAs online.   

There are lots of ISAs available and they have different terms and conditions, and different rates of interest. Shop around to find the best deal for you and the most competitive rates.  

 In the case of Stakeholder ISAs, the charges are capped.

SEEKING ADVICE

If you have any doubts about whether an ISA is suitable for you or about your tax position, you should seek professional financial advice. IMA's online ‘Find a Financial Adviser' service can help you look for an adviser.