Use It or Lose It – ISA Deadline 1st April 2021

ISA Deadline Countdown

An ISA is essentially a flexible tax-free investment wrapper with an annual subscription limit. There are three types of ISA * which have a total subscription limit of £20,000 for the current tax year. They are:

  • Cash ISAs
  • Stocks and shares ISAs
  • Innovative finance ISAs

* There are other types of ISA including Lifetime ISAs, Junior ISAs and Help to Buy ISAs. However, the annual subscription limit and rules governing these ISAs are all slightly different. 

An individual can put money into an ISA of each type in a tax year and split their allowance as they wish between the three different types. Assuming the ISA is “flexible”, they can even take money out of the ISA and put it back in later in the tax year without losing any of their tax-free allowance.

Investment gains within an ISA are tax free. There is no tax to pay on any interest earned within a cash ISA, and there is no income or capital gains tax to pay on profits made within a stocks and shares or innovative finance ISA.

It is possible to transfer an ISA from one provider to another at any time. If you wish to transfer money you have invested in an ISA in the current year, you must transfer all of it. You can choose to transfer all or part of the money you have invested in an ISA in previous years.

ISAs lose their tax-free status on death and will form part of the deceased’s estate for inheritance tax purposes. However, the tax benefits built up within an ISA can be passed on to a surviving spouse or civil partner as an Inheritance ISA.