An ISA, or individual savings account, is a savings account where all of the interest earned is tax free and doesn’t form part of your Personal Savings Allowance.
At the start of each new tax year (6 April), every UK adult receives an ISA allowance. For the 2021/2022 tax year, this allowance is £20,000. You can split the allowance across the different ISA types - cash ISA, stocks and shares ISA, innovative finance ISA and Lifetime ISA - or save the whole allowance in one type of ISA (apart from the Lifetime ISA, which has a limit of £4,000). Aldermore offers Cash ISAs only.
Most ISA providers only let you open one Cash ISA each tax year, which can restrict your options.
If you don’t use all of your allowance during the tax year, it will be lost – it can’t be rolled over to the next tax year. By making sure that you use your ISA allowance each year, your pot of tax free savings can continue to build year on year.