Our ISA Guide
Everything you need to know
Tax efficient savings
Our RBS cash ISA guide
What is an ISA and who can have one?
An ISA is a tax efficient way to save and stands for Individual Savings Account. An ISA lets you pay little or no tax on the interest your savings and investments make.
There are three main types of ISA:
- Cash ISAs – these are simply savings accounts that are tax-free
- Stocks & shares ISAs – these are investments that are classed as tax efficient
- Innovative finance ISAs (from 6th April 2016) – these are peer to peer lending investments that are classed as tax efficient.
Paying money into an ISA:
Paying into an ISA is called subscribing. You can subscribe to one of each type of ISAs each tax year, providing between them you do not subscribe more than your annual ISA allowance. For the 2016/2017 tax year that runs from 6th April 2016 to 5th April 2017 your annual ISA allowance is £15,240.
ISAs are a good idea whatever your savings goal. With certain types of cash ISAs, you have instant access to your money, making it a flexible way to plan your finances.
Having an ISA is also a great way to save tax efficiently as an additional part of your long term financial planning. Stocks and shares ISAs are intended as a medium to long-term investment which means they should be held for at least 5 years.
It’s important to remember that ISA allowance limits apply to everyone on an individual basis, so if you’re married or in a relationship, you can both hold your own ISA, each with the full allowance.
To subscribe to an ISA:
- You must be aged 16 or over.
- You must be resident in the UK for tax purposes.
- Have not subscribed to another cash ISA in the same tax year.
- You can subscribe to one cash ISA and one stocks and shares ISA in a tax year, but there are limits to how much you can save in each ISA – see the following section ‘How much can I put into an ISA’.
Our Instant Access cash ISA does not offer Flexible ISA functionality, therefore if you withdraw funds from it, you cannot reinvest in the same tax year if your total deposits exceed your annual allowance.
|Your cash ISA yearly limit||£15,240|
|You pay into your cash ISA||£11,240|
|Your remaining tax-free allowance is||£4,000|
|You then make a withdrawal of||£500|
|Your remaining tax-free allowance is still||£4,000|
|Overall possible saving by end of tax year||£14,740|
Our Fixed Rate ISA does not allow you to withdraw funds during the term. If you close the Fixed Rate ISA during the term, you’ll incur an Early Closure Charge.
Choosing an ISA
We offer two types of chas ISAs:
Instant Access ISA - An instant access variable interest rate account where interest rates can move up or down.
Fixed Rate ISA - Offers either a 1 or 2 year term and the interest rate is fixed for this period, although you are not allowed to withdraw funds during the term. If you close the Fixed Rate ISA during the term, you’ll incur an Early Closure Charge.
What happens in the future to my cash ISA?
Making future subscriptions
You can keep a variable rate cash ISA open year after year, paying into them in subsequent tax-years, up to your yearly allowance. However, if an entire tax-year goes by without a deposit being made into your cash ISA, you cannot make any further payments into it until you have reactivated your account.
How to reactivate a cash ISA
To reactivate your cash ISA to carry on saving into it, you simply need to complete a reactivation form. We’ve made this really simple with no paperwork needed our online reactivation form
Transferring a cash ISA
You can only have one cash ISA per tax year. If you want to move your current or previous cash ISA balances between providers, there’s a transfer process that safeguards your tax-free entitlement.
Some cash ISA transfers can take up to 15 working days to process, and your new ISA provider will start to pay your interest from day 16 if the transfer process is not complete within this period. This allows you to start earning interest from your new cash ISA account faster.
For more information on the transfer timelines, the British Banking Association has produced the following guide:
Transferring a stocks & shares ISA to a cash ISA
From 1st July 2014, as part of the New ISA changes, you may now transfer from a stocks and shares ISA to a cash ISA.
As with cash ISA transfers if you want to move current or previous tax years balances there’s a transfer process that safeguards your tax efficient entitlement.
Transfers from stocks and shares ISAs to cash ISA take up to 30 calendar days to be completed and your existing stocks and shares ISA provider will sell your investments and send the cash to your new cash ISA provider. Your new cash ISA provider will then apply the cash to your account, keeping it within the ISA wrapper.
What to do next
If you already subscribe to an ISA, you can continue saving in your existing ISA in the new tax year, or you can open a new ISA. You can only subscribe to one cash ISA per tax year. Don’t forget the tax year ends on 5 April – make sure you take advantage of this years’ allowance before it’s too late.
You will normally need the following information when setting up an ISA:
- Your National Insurance number
- One form of evidence of your identity (a current passport, full UK driving licence, a benefit book or a UK armed forces identity card)
- One form of evidence of your address (an original gas, electricity, phone or council tax bill, an original bank or building society statement)
All documents should be the most recent you have, and from within the last six months.
ISAs made clear
Our ISA guide explains everything you need to know about ISAs and tax-efficient saving.