FAQ About Individual Savings Accounts

The main difference between an ISA and other types of savings accounts is that ISAs offer tax-free savings and investment returns up to a certain limit, while other savings accounts do not.

With an ISA, any interest earned on cash savings, dividends earned on stocks and shares, or capital gains earned on investments are free from income tax and capital gains tax (CGT). In contrast, interest earned on other types of savings accounts, such as standard savings accounts or current accounts, is subject to income tax. Similarly, returns earned on investments held outside of an ISA, such as shares or funds held in a standard brokerage account, are subject to CGT.

Additionally, ISAs generally offer a range of investment options, such as stocks and shares, cash, and innovative finance investments, which can provide higher returns than standard savings accounts or current accounts.

However, it's worth noting that ISAs typically have annual contribution limits, and not all types of savings and investment products are eligible to be held within an ISA. Additionally, while ISAs offer tax-free returns, they may not always provide the highest returns on savings or investments. It's important to consider your personal financial goals and circumstances when deciding whether an ISA or another type of savings account is the best option for you.