ISA 2020: When does new ISA year start? | Personal Finance | Finance

ISA accounts allow you to save £20,000 in a tax year completely tax free. Britons are facing increasing levels of tax in the future, but ISAs are a good means of saving money for your future. The tax year for 2019/2020 has now ended, but when does the new ISA year start?

What is an ISA?

An ISA is a savings account which you can never pay tax on.

ISAs do however come with one restriction, which is the amount of money you can save or invest into it in any single tax year, this is known as your annual ISA allowance.

For the 2020/2021 tax year, this allowance is £20,000.

READ MORE: ISA limits: How much is the tax free allowance?

Stocks and shares ISA

A stocks and shares ISA is an investment account, where all capital gains and income are protected from tax. 

You can pay up to £20,000 in stocks and shares.

Innovative finance ISA

An innovative finance ISA, also known as an Ifisa, is an ISA which contains peer-to-peer loans.

Help to Buy ISA

A Help to Buy ISA is a government-backed cash ISA savings account which is aimed at helping first-time buyers onto the property ladder.

Lifetime ISA

A lifetime ISA is a government-backed savings scheme to help people buy their first home and/or save for retirement.

Junior ISA

A junior ISA is an account for young people aged under 18.

How will ISAs be affected in the 2020/2021 tax year?

Junior ISAs have see changes in the 2020/2021 tax year.

Junior ISAs may only be opened by parents who are saving money for their child, however, other family members can make contributions.

This money is not accessible until the child turns 18.

All the money saved in this account is tax free and parents are able to open either a cash junior ISA at a fixed rate or an investment junior ISA in which money accrues based on how the stock market is performing.

From April 6, the annual limit that can be paid into a junior Isa will more than double, rising from £4,368 to £9,000.

How does an ISA impact your benefits?

ISA money qualifies as savings and therefore can have a detrimental impact on your benefits entitlement.

Lifetime ISAs can be particularly problematic because you may be penalised for withdrawals of this money.

If you claim Universal Credit, any savings of more than £6,000 are assumed to give you a certain income and therefore could reduce your Universal Credit payments.

But if you have less than £6,000 saved there will be no impact on your payments, but for those with more than £16,000 in savings, you will not be able to claim Universal Credit at all.

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