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ISA

An Individual Savings Account (ISA) is like a locked bag holding different types of investments, and only you can open the bag. The taxman can't get his hands on it - any money you make within an ISA is tax-free.

This means you don't pay income tax on any income you make from your ISA and any increase in the original sum you invested (the capital) in your ISA is not subject to capital gains tax.

ISAs have taken over from personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) as one of the main ways for people to save money without paying tax.

Mini and Maxi ISAs
There are two types of ISA to choose from - the Mini and the Maxi ISA and there are three different types of investment that you can choose to invest in through your ISA. These are stocks and shares, life company investments and cash.

In any tax year (a year running from 6th April to 5th April) you can buy up to three different types of Mini ISAs or one Maxi ISA. You can't take out a Mini and a Maxi ISA in the same tax year. Depending if you choose a Mini or a Maxi ISA, there are limits to the amount you can put in. Here's what's allowed, and these limits are set until 2005/2006.

Mini ISA
You can take out up to three a year, but each one must be different type of investment, e.g. you can't have two stocks and shares Mini ISAs.

Mini ISA 1
Invest up to £3,000 in cash.

Mini ISA 2
Invest up to £3,000 in stocks and shares.

Mini ISA 3
Invest up to £1,000 in life company investments.

Maxi ISA
You can only take out one a year. You can invest in just one type of investment, or all three types up to set limits.

Maxi ISA
Up to £7,000 invested in stocks and shares, or

A mixture of stocks and shares, cash and life company investments. Investing up to £7,000 in total, of which:

  • Up to £3,000 can be in cash.
  • Up to £1,000 can be in life company investments.
  • Up to £7,000 can be invested in stocks and shares.

One of the big differences between a Maxi and a Mini ISA, is whilst you can have up to 3 Mini ISAs a year, which can all be with different providers, you can only take out one Maxi ISA a year.

Want to find out more about ISAs then click on the links below:

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