ISA accounts are UK tax-free savings accounts. That they are tax-free is an advantage when compared to other alternative saving accounts which have net interest rates. However, before investing in an ISA, it’s worth noting some of the standard terms and conditions.
ISA accounts come in two components. The saving accounts can have maximum deposits of £5, 340 in a tax year. If you make withdrawals in one tax year, you cannot reinvest if you have already reached the maximum deposit for the year. However, the other component is that of Stock and Share ISAs, and you can invest up to £10, 680 with these. These could require a monthly commission as well.
Although, it’s worth noting that minimum deposits can vary from ISA to ISA. ISA accounts can have higher and lower minimum deposit requirements. This is something that the banks set, so it is not always the same.
It is also worth noting that you can only have one ISA in a financial year. Multiple ISAs cannot be opened with different banks. Only when you have closed one ISA can you then invest in another alternative.
It may also be required that you have a current account with the bank before you open an ISA. However, this depends on the account, and not all banks may require this.
ISA accounts can come in different shapes and sizes. Banks usually have a few ISA account packages that are not entirely the same. For example, it may be the case that an ISA account has to be opened for a specific period such as one, two or three years. These are usually fixed rate ISA accounts that may require that no withdrawals are made for the period.
Other alternative ISA accounts may also have bonus interest rates. Bonus interest rates of 1 – 2% can be included with the ISA account, usually for one year. However, after this the interest rate will drop quite a bit.
Junior ISA accounts are new ISAs which can be opened by young people under the age of 18. These are not entirely the same as the more senior ISA accounts, primarily because they have a lower subscription limit. At the time of writing, a maximum deposit of 3, 600 can be invested in a Junior ISA.
These are the main terms and conditions of ISA saving accounts. You’ll still need to check the account details as the banks also have their own terms and conditions which vary with different ISA account packages.