Disclaimer: Our website and publications aim to give you general information to help you make financial decisions. It is not advice, nor can it take account of your own particular circumstances. For advice with a view to making decisions about your own circumstances you should consult a financial or other professional adviser.

© The Financial Services Authority.

Tax wrappers


ISAs (Individual Savings Accounts)

An ISA is not an investment on its own, it's a tax wrapper that you put around an investment. You can have a stocks and shares ISA which can include:

Alternatively you can have a cash ISA – see ISAs. You can have a different type of ISA with a different provider each tax year.

As long as you keep the investments within an ISA you do not have to pay any income tax or capital gains tax on the growth of the investments. Because of the tax breaks, there is a limit to how much you can put in an ISA.

The ISA rules were simplified on 6 April 2008.

  • You have an overall ISA allowance of up to £7,200 each tax year.
  • The whole allowance can be invested in a stocks and shares ISA; or you can save up to £3,600 of it in a cash ISA.
  • You can transfer money from a cash ISA to a stocks and shares ISA – but not the other way around.
  • Mini and maxi ISAs no longer exist – mini stocks and shares ISAs automatically became stocks and shares ISAs.
  • Personal Equity Plans (PEPs) also became stocks and shares ISAs.

The HM Revenue & Customs website has a list of questions and answers about the new rules that you may find useful – see Related links.

Pensions

A pension is a long-term investment with a tax wrapper and special rules (about how much you can invest, when and in what form you can take benefits). Briefly, you get tax relief on your contributions up to a set limit and your income is taxable when you receive it at retirement.

With most pensions the same basic rules about investments apply – asset classes, diversification and pooling. Remember, with a pension you are usually investing over a longer period so you may be willing to take a bit more risk with your pension investments. Salary-related pensions work in a different way.

See the Pensions section for full details about pensions.