ISAs Explained

A Cash ISA is a savings account where the interest is tax-free. To qualify, you must be a UK resident aged 18 or over. ISAs cannot be held jointly. The ISA rules, including the amount you can save each year, are determined by the Government and HM Revenue & Customs and may be subject to change.

You can save up to £20,000 into an ISA in any tax year. If you don’t use this in full, the unused amount cannot be carried forward into the next tax year.

You can save into more than one type of ISA in a tax year, but the £20,000 limit applies to funds in all ISAs. For example, you can pay £10,000 into a Cash ISA and £10,000 into a Stocks and Shares ISA and this would use up your limit.

Any interest earned on a standard savings account may be subject to income tax. However, none of the interest earned on your ISA savings is taxable and it does not count towards your Personal Savings Allowance (see below), so the more you can save into an ISA, the better.

Your Personal Savings Allowance is the amount of interest you can receive from savings in a tax year before paying tax. The amount of the allowance depends on the rate of tax that you pay:

• Basic rate taxpayers will pay tax on all interest earned over £1,000.

• Higher rate taxpayers will pay tax on all interest earned over £500.

Any interest paid to a Cash ISA is free of tax and does not count towards your Personal Savings Allowance. You can find more about this allowance by visiting: www.gov.uk/apply-tax-free-interest-on-savings

A tax year runs from the 6^th of April to the 5^th of April in the following year.

There is no limit to how many Cash ISAs you have. From 6^th April 2024, you can save into more than one Cash ISA in a single tax year providing you do not exceed your overall £20,000 ISA allowance.

If an ISA is flexible, you can withdraw money and replace it, without the replacement counting further towards your ISA allowance.

The only condition is that you replace funds in the same tax year the withdrawal was made.

Flexible ISA rules are a bit complicated, so we’ve given some examples below:

If your ISA only has money paid in previous tax years

In this case you can withdraw some, or all, of your money and replace it before the end of the current tax year, without using any of your current tax year’s ISA allowance.

If your ISA only has money that was deposited in current tax year

In this case you can withdraw some, or all, of your money and replace it before the end of the current tax year, without it counting again to your current tax year’s ISA allowance.

For example, if you've paid £15,000 into your cash ISA in the current tax year and then you withdraw £5,000:

• Providing it’s the same tax year, you can then deposit up to £10,000 into the account - the £5,000 you previously withdrew, plus an additional £5,000 that would take the total paid in to £20,000.

If your ISA has money from previous tax years and the current tax year

In this case withdrawals are firstly taken from whatever money you've deposited in the current tax year. If you withdraw more than you've deposited in the current tax year, then it will be taken from money you've deposited in previous tax years.

When you come to pay the money back in – which again, you must do before the end of the current tax year - this works the other way around; money you deposit is first used to refill your allowances from previous years, and then your cash ISA allowance from the current tax year.

For example, if you paid in £40,000 in previous tax years, and have so far deposited £10,000 in the current tax year and you then make a withdrawal of £25,000:

• The first £10,000 is taken from the cash you've deposited in the current tax year, and the remaining £15,000 will be taken from the £40,000 from the previous tax years.

• If you pay the money back, the £15,000 from the previous tax year is replaced first, then the £10,000 from the current tax year. After that, you'd still have £10,000 left of the current year's ISA allowance to use.

The opening process may vary across our different ISA account types. Please refer to each individual product page for the most up-to-date information.

You have 14 days from opening an account in which to change your mind and request cancellation of your deposit by writing to us or emailing customerservices@thevernon.co.uk. Your cancelled ISA will not count as an ISA subscription. Interest will be paid gross during the cancellation period.

You can transfer an existing ISA account from one provider to another. This doesn’t count as a withdrawal and any unused ISA subscriptions will move over too. Before deciding to transfer an ISA, you should first check that the receiving ISA accepts transfers in. You should also check whether there are any charges from your existing ISA provider to switch (such as interest penalties on fixed rate ISAs)

If you haven’t already got one, you will first need to open a Cash ISA with us. You should ensure that the account you’ve chosen will accept transfers from other providers – some of our Cash ISAs do not allow this. You will need to complete a form to make the transfer, which can be obtained from any of our branches. We will send this to your existing provider, and they will send the money to your account.

You need to speak to your new ISA provider, who will be able to arrange the transfer for you.

You will need to provide your Vernon ISA details:

• Account number: 10920320

• Sort code: 20-55-34

• Reference: Your Vernon account number

Your Vernon account number is printed at the top of the right-hand page of your passbook. You can also find it by logging on to Online Services or, if applicable, on your Fixed Rate ISA certificate.

Starting from the 2024/2025 tax year, you can make partial transfers out from an account but only for funds from previous years subscriptions. Any subscriptions made in the current tax year must be transferred in full.

If you transfer the full balance of your ISA then the account will be closed.

If your spouse or civil partner dies, you should be able to inherit one-off additional ISA allowance that's equivalent to the value of their ISA when they died. This is known as an ‘additional permitted subscription’ (APS).

The additional allowance must be used within three years after the date of death, or 180 days after the settling of the estate, if this is later.

If you think that you might benefit from this extra allowance then please talk to one of our branch Customer Advisers.