Branches & agencies
If you’re unsure what an ISA is and how it works, this guide will tell you all you need to know…
What is an ISA?
It’s a tax-free savings account. Individual Savings Accounts (ISAs) were introduced by the government in April 1999 to help people build up a savings pot without paying tax on the interest earned in those accounts.
There are four types of ISA, but the most popular one is a Cash ISA and that’s the type we offer. They’re safe and reliable, and you can see our range of Cash ISAs here.
Doesn’t everyone get a Personal Savings Allowance anyway?
Yes, most people do. If you pay income tax at the basic rate, you can earn up to £1,000 interest on your savings without paying tax on it. For higher-rate income tax payers, the allowance is £500, and for additional-rate income tax payers it’s nil.
The interest earned from ISAs is separate from that allowance. It’s a tax-free product, so even if you’ve reached your tax-free limit on other savings, the interest from your ISAs is still tax free.
What’s the ISA allowance?
The tax year runs from 6 April to 5 April the following year. For the 2024-25 tax year, the allowance is £20,000. This means you can add up to £20,000 in total across all the ISAs you hold.
Any unused allowance doesn’t roll over. It starts again from 6 April.
Is it easy to transfer an ISA?
Yes, and if you have a Cash ISA with another provider and you don’t think it’s performing well, we make it very easy to transfer the ISA to us. There are just a few simple steps to follow, and our information page clearly explains how to do it.
Does transferring an ISA count toward the allowance?
As long as you directly transfer money from one ISA to another, it doesn’t count toward your allowance. This is because it’s treated as ‘old’ money. Adding money to an ISA is ‘new’ money, and the limit is £20,000 during the tax year.
It’s important to note that if you withdraw money from an ISA and then pay it into another one, that is treated as ‘new’ money.
Can I add to more than one ISA in the same tax year?
In the same tax year, you could (for example) add ‘new’ money to a Hinckley & Rugby Cash ISA and to an ISA (or more than one) that you hold with other providers. Just keep in mind that the total you can add across all the ISAs you hold is £20,000 in a tax year.
Things can get complicated when you try to balance too many things. We like to keep things simple, and you can only add to one Hinckley & Rugby Cash ISA during a tax year.
Is there any benefit to having more than one Cash ISA, anyway?
Well, if you have a lump sum that you’re happy to lock away for a while, you might want to have a long-term ISA and a second more-flexible ISA.
For example, let’s say you have a lump sum in a Cash ISA that isn’t performing well anymore. You could take advantage of the attractive rates offered by Hinckley & Rugby’s 30-month and 5-year fixed-rate Cash ISAs, and transfer your ISA to us. These accounts can’t be added-to after they’re opened, but you could (at the same time as transferring) top-up the money – up to your allowance for the current tax year.
Perhaps later, whenever you’re ready to increase your ISA savings, you might choose to open one of our Notice Cash ISAs and add to it from the next tax year’s allowance (which starts again 6 April), resulting in a flexible combination of long-term and medium-term tax-free savings.
Looking to transfer your Cash ISA and lock in a great rate? Read our latest blog.
Want to know the benefits of an ISA? Check out our Top 5 ISA Benefits blog post.
