In this article, we’re answering “What is an ISA account?”
We’ll also be diving into the different types of ISA accounts, the specific requirements for opening, and the restrictions imposed on prospective ISA account holders.
This article is part of our free series on online banking and opening the best online bank account in Europe, which you can access now by clicking here – or continue reading to uncover what an ISA account really is.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is an ISA Account?
- Opening Individual Savings Accounts in the UK
- What Are the Requirements for Opening an ISA Account?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
What Is an ISA Account?
An ISA account refers to a tax-efficient savings account that UK residents can subscribe to. There are four ISA accounts (or Individual Savings Accounts) to choose from. Each year, UK residents can deposit up to the “ISA allowance” to shield those savings from future income, dividend, and capital gains tax.
Importantly, ISA accounts are available from a wide range of financial institutions in the United Kingdom, including:
- Banks
- Building Societies
- Credit Unions
- Brokerage Firms
- Various Fintech Platforms
- Other Financial Institutions
In the next section of the article, we’re going to expand on the answer to “What is an ISA account?” and we’ll also share how you can open an ISA in the UK today.
But first, if you’re looking to apply with a bank for a bank account with an overdraft, you can access our free article linked here to get started.
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Opening Individual Savings Accounts in the UK
When opening an Individual Savings Account (ISA) in the UK, you need to meet several specific requirements. In this section of the article, we’ll explain these requirements and answer a few common questions that we receive on the subject of “What is an ISA account?”
Can a Non-Resident Open an ISA in the UK?
No, a non-resident cannot open an ISA in the UK. This is because ISA accounts are tax-efficient accounts designed to help tax residents shield their funds from income, dividend, and capital gains taxes while effectively growing their savings.
The only exception to this non-resident rule occurs if an individual is an employee of the UK government living overseas, which would fall under the “Crown employee rules”.
That said, there is a wide range of tax-efficient account options available to UK non-residents. However, the specific accounts and investments that best meet their needs will depend on the country where they maintain tax residency.
With this in mind, it’s always best to consult a qualified professional when looking for tax-efficient solutions to help grow your savings over long periods of time.
What Are the Requirements for Opening an ISA Account?
Age Requirement to Subscribe to an ISA Account
The age requirement to subscribe to an Individual Savings Account (ISA) varies depending on the type of ISA you want to subscribe to. Here are the minimum ages required for each ISA option:
- Cash ISA: 16 years old
- Stocks and Shares ISA: 18 years old
- Innovative Finance ISA: 18 years old
- Lifetime ISA: 18 years old (less than 40)
However, in addition to the age requirement, applicants must also be able to prove residency and provide the necessary documentation. With this in mind, here is a look at the other requirements to subscribe to an ISA account.
Requirements for Opening Individual Savings Accounts
The requirements for opening Individual Savings Accounts (ISAs) include:
- Age required to open
- UK residency
- Accepted proof of UK address
- Government-issued proof of identity
- UK National Insurance Number
With the above requirements in hand, applicants can successfully subscribe to an ISA.
Frequently Asked Questions
Below are three of the most common questions that we receive from people looking into what an ISA account is. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
How Do ISAs Work?
ISAs work in a similar fashion to most savings accounts, with one major difference: The interest earned on an ISA or Individual Savings Account is tax-free. This means that the account holder can efficiently grow their savings without the burden of paying tax on the related income or capital gains.
Is an ISA Account Tax Efficient?
Yes, an ISA is a tax-efficient account because it allows account holders to grow their money on a tax-free basis. This tax-free growth continues as long as the funds are kept in the account. An ISA account is domiciled in the United Kingdom but it is similar to tax-efficient accounts that are available elsewhere in the world.
What Are Cash ISAs?
Cash ISAs are Individual Savings Accounts domiciled in the United Kingdom that allow account holders to earn interest on their savings tax-free. It’s important to note that Cash ISAs are one of the four available Individual Savings Accounts from which UK residents can choose. To subscribe to a Cash ISA, applicants must be 16 years old, resident in the UK, and be able to provide proof of address, government identification, and their National Insurance Number.
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