What is an ISA?
ISA stands for Individual Savings Account.
The main difference between an ISA and any other savings account is that it offers tax-free savings, on top of your personal savings allowance.
There are 5 types of ISA:
• Cash ISAs
• Stocks and Shares ISAs
• Lifetime ISAs
• Junior ISAs
• Innovative finance ISAs
Currently here at Melton Building Society we only offer cash ISAs.
What are cash ISAs?
Cash ISAs are tax-free savings accounts, which means you don’t pay tax on the interest you earn. You can open some ISAs with as little as £1, but other accounts have a higher minimum balance.
At Melton Building Society we offer various types of cash ISAs that each offer different ways to access your money:
• Easy Access – put money in and take your money out whenever you need to access it
• Notice – withdraw your money by providing us with the agreed notice set on the account
• Fixed Rate – lock away your money for a fixed period and earn the advertised interest rate, which will not change until the account matures
With the Melton, you can only pay into one cash ISA in any tax year, which runs from 6th April to 5th of April the following year, this ISA will be known as your ‘active’ cash ISA. Some other providers offer an option called a portfolio ISA – this is where you can split your ISA subscription across multiple cash ISAs.
How do I open an ISA?
ISAs can be opened and managed through a variety of channels including branch, postal, online and via an app dependent on which provider you use. You should check what options each provider offers before you open an account to make sure it works for you.
Currently, the Melton caters for ISAs to be opened in branch or via post, and you can view your accounts using our ‘MyMelton Online’ platform.
How much can you put in an ISA?
The ISA allowance is the most you can deposit into ISAs each tax year. The current ISA allowance is £20,000, and this is reviewed each year by HMRC.
You can split your allowance across the different types of ISA. For example, you could save some in a cash ISA and some in a stocks and shares ISA, but the combined deposits should never exceed the ISA allowance for that tax year.
When you’re paying into a new ISA, you should check how long you can deposit into the account. For some accounts, you can deposit all year round. For others, such as fixed rate ISAs, there can be a limited window for you to make deposits. It’s important to be aware of this, so you can make sure you’re fully utilising your annual ISA allowance.
Can I withdraw from my ISA?
If you are withdrawing from a cash ISA that you have paid into this tax year you cannot replace the funds you withdraw, and you will lose that proportion of your annual ISA allowance.
For example, if you deposit £15,000 at the start of the tax year and then withdraw £1,000, you will still have used £15,000 of your ISA allowance and will only be able to deposit a further £5,000 until the new tax year begins.
The rules around withdrawals differ with a flexible ISA, which are explained below.
Some products can have limits on the number of withdrawals or may not allow withdrawals. It is important you review the terms of the account to determine whether you can make withdrawals, this information should be available within the product details of the product you are considering opening.
What is a flexible ISA?
A flexible ISA means you can take money out of your ISA and replace it without using up more of your ISA allowance. For example, if you deposited £15,000 then withdrew £2,000, you’d still have £7,000 of your ISA allowance remaining as you can replace the withdrawn funds.
If your ISA isn’t a flexible ISA, all money deposited will count towards your ISA allowance and you will not be able to deposit more than £20,000 in a tax year regardless of how much you withdraw. For example, if you deposited £15,000 and then withdrew £2,000, you’d only have £5,000 of your ISA allowance remaining despite the withdrawal.
Currently, at Melton Building Society we do not offer flexible ISAs.
Transferring an ISA
If you have built up ISA savings in previous tax years, subject to the terms on your new account, you are able to open a new ISA and move the balances over, this is called an ISA transfer. You can also transfer an ISA that you have paid into in the current tax year. You can transfer between accounts at the same provider, or you could transfer to a new provider.
All ISAs can be transferred, but it’s important that you follow the formal ISA transfer process to transfer the balance so that you don’t deposit into more than one cash ISA in a tax year, and that your funds don’t lose their tax-free status. Your new ISA provider will help you do this, or if you’re moving to another account with the same provider they can help you.
To find out more about how you can ensure your money keeps its tax-free status, visit our ISA Transfer Hub.
Can I transfer my money to a non-ISA account?
If you withdraw or transfer money from your ISA to a non-ISA account, the funds you move will lose their tax-free status. This could mean that you need to pay tax on your interest, subject to your Personal Savings Allowance.
