ISAs Explained

An ISA (Individual Savings Account) is a type of savings account created by the UK government to help people save for the future. To encourage saving, the government created ISAs with tax benefits, so they’re a way of getting more for your money because you don’t have to pay any tax on the interest you earn.

What is an ISA?

It’s a kind of personal savings account. There are four types of adult ISAs.

Cash ISAs - Tax free accounts that offer a set interest rate. Your money will rise steadily over time. They’re the simplest kind of ISA, but need high interest rates to deliver similar returns to Stocks and Shares ISAs.

Innovative Finance ISAs (IFISA) - An investment where you lend your money to other members of a network and (hopefully) make your money back plus interest. They’re quite complex, not recommended for beginners, and not the kind of product mynestegg offers.

Lifetime ISAs (LISA) - A lifetime ISA is a long-term savings plan. You have to start before you’re 40, and can save up to £4,000 each year. The government then pays you a 25% bonus of up to £1,000 per year. But unlike other ISAs, you can only take out your money to buy your first home, when you hit the age of 60, or if you’re diagnosed with a terminal illness. It’s not a flexible way to save.

The final type of adult ISA is the kind that mynestegg offers.

Stocks and Shares ISA - Instead of your money earning interest like a Cash ISA, being locked away like a Lifetime ISA or shared around like an IFISA, a stocks and shares ISA invests your savings into a range of companies. Your investment can go down as well as up, but a stocks and shares ISA - invested into the right kind of businesses - can outperform cash ISAs by a good margin. The risk is still lower than with an IFISA, and unlike a Lifetime ISA, you can withdraw it at any time.

There are also Junior ISAs - which allow parents and guardians to open accounts for children and teens. 

Who can have an ISA?

As of 6 April 2024, any UK resident aged 18 or over can open an ISA.

The only exception to this is a Lifetime ISA - where savers have to be between 18 and 40 years old.

There’s a special type of ISA for those under the age of 18 called a Junior ISA, which you can set up for children and teens. They’re opened by a parent or guardian, but the money in a Junior ISA belongs to the child. They take control of the account at age 16, and can withdraw money from age 18 onwards.

How much can I save in an ISA?

Every tax year, you can save up to £20,000 tax-free in ISAs. That can be in one single ISA, or split across multiple ISAs.

The tax year runs from April 6 to April 5 the following year.

One reason to save into multiple ISAs is that you’re testing out a new provider. If you’re choosing between accounts, there’d be nothing stopping you putting £5,000 into a stocks and shares ISA from mynestegg, another £5,000 into a cash ISA from a high street bank and seeing which performs better.

And if it’s mynestegg that wins out, we’ll help you consolidate your savings together.

If you want to know how the money in your mynestegg ISA can add up over time, head over to our ISA savings calculator.

Where does the money go in a mynestegg ISA?

Savings with mynestegg are invested into some of the world’s biggest, most successful brands. We work via trusted institutions who manage over ten trillion pounds for customers just like you. 

How risky is saving in an ISA?

All financial investments have some level of risk. Nobody’s got a crystal ball to see how any business will perform, which is why it’s important to spread the risk. We don’t put all your eggs in one basket, splitting your savings across all regions of the globe, into multiple companies so that one bad quarter for one particular stock won’t hold you back too much. 

Our approach to ISAs is backed by the Financial Services Compensation Scheme (FSCS) to give you a little extra piece of mind too. 

Plus, you can choose your level of risk. We let you pick between cautious, balanced and adventurous investments with different levels of risk - and reward.

When can I take my money out of my ISA?

You can take your cash out of an ISA at any time (unless it’s a Lifetime ISA). Some providers will charge you an extra fee when you withdraw your savings. mynestegg don’t. It’s all yours, whenever you need it.

What can I use my ISA for?

Anything you’d like. Some people save into an ISA to keep a little nest egg to pass on to their kids. Some use it to fund holidays of a lifetime, their dream car, or even a new home. And other people like the security that comes with knowing there’s a lump of tax free savings just waiting in case of an emergency.

Whatever you’re saving for, with mynestegg you’ll be able to see your ISA grow from the palm of your hand, thanks to our easy to use app. And with our unique, free-to-use calculator, you can see how much you’ll save in just 30 seconds so you can start planning what you’ll spend it on straight away. 

Here’s a quick video

Ready to open an ISA?

Want to transfer your ISA?

Learn more about your ISA

That’s the basics covered, but there’s lots more to learn about ISAs so you can make the most of your savings and secure your tomorrow, today: