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How does an ISA work ?

The structures of ISAs were changed in April 2008. There are only two kinds now - cash and investment. Mini and Maxi ISAs no longer exist.

Investment (or Stocks and shares) ISAs
You can choose individual shares or bonds, or pooled investments such as open-ended investment funds, investment trusts or life assurance investments. The funds available will depend on which investment company you choose to run your Investment ISA. These are seen as more ‘risky’ than cash ISA’s, as returns are not guaranteed, but also have the potential to deliver much higher returns. Interest rates will fluctuate throughout the plan. There is a maximum annual limit of £15,000 that can be deposited into an investment ISA.

Cash ISAs
The same £15,000 limit applies to cash ISAs, but the limit is cumulative, meaning if you had £4,000 in a cash ISA, you would only be able to place a further £11,000 in a stocks and shares ISA. Cash ISA’s are considered a safer option than stocks and shares ISA’s, as interest rates are guaranteed, but traditionally stocks and shares ISA’s have fared slightly better

Held an ISA for more than one year and want to save more?

You can transfer money saved in previous years' cash ISA or stocks and shares ISA holdings to this years cash ISA or stocks and shares ISA without affecting your current year's allowance.

The limits on ISA investment and savings are annual, and as soon as the tax year comes round again, your allowance is reset.

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