Getting the most out of your ISAs

When the UK government launched Individual Savings Accounts (ISAs) in 1999 it hoped to boost the country’s savings culture.

They are certainly a success, with some 13 million adult ISA accounts subscribed to in 2019/20, with a market value of around £620 billion, according to government data .

While an ISA is very likely to form part of your financial plan, ISAs offer a range of products and features that not all savers and investors will be aware of. Here, we pick out 10 things you might not know about ISAs and which may help you get even more out of them.

1. Cash ISAs aren't what they used to be

The tax benefits of Cash ISAs once ensured they were the first port of call for cash savers. But the introduction of the Personal Savings Allowance (PSA) in 2016 changed that. The PSA allows basic rate taxpayers to earn interest of up to £1,000 tax-free in each tax year, reducing to £500 for higher rate taxpayers. Additional or top-rate taxpayers are not eligible for the PSA. With few people likely to earn cash interest above those thresholds, and many savings accounts offering better interest rates at the moment, there will likely be a better home for your easy access cash savings than a Cash ISA.

2. Couples can ‘share’ their ISA allowance

Although ISAs are ‘individual’ savings accounts that are held in one person’s name, spouses and civil partners can maximise their allowances by taking advantage of rules allowing the transfer of gifts between each other. With gifts between spouses and civil partners exempt from Capital Gains Tax (CGT) and IHT, if you have maxed out your own ISA, you can add funds to your spouse’s ISA, so that both allowances are used.