Tax Efficiency

Efficiency is the name of the game when taxes are involved. How efficient you are can determine how much money an individual or business has to pay. An ISA is an extremely efficient way for someone to save up a good sum of money tax free or with very little taxes involved.

What is an ISA?

An ISA (sometimes seen as “NISA”) is an acronym that stands for “(New) Individual Savings Account”, and is a way for citizens in the UK save money tax free. This type of account was specifically provided by the government as a way for people to save up for the future. Whether you need money for a rainy day, or are trying to save up for a nice car, an ISA is the best way to do it.

The maximum amount anyone can invest in an ISA is £15,000 per year. The maximum amount varies per year. Investing with an ISA will protect the individual from income or a capital gains tax. This also applies to any income earned from said investments or savings.

Like any service, it is important to shop around for investment managers, as ISA’s are fairly common. Most companies will charge you some sort of fee, and that fee will vary depending on which company you sign up with. A new and naive investor can be overcharged by a company if they aren’t careful.

What types of ISA are there?

There are two types of ISA’s that an individual can choose to enroll in. The first type is simple cash savings account where the interest is not taxed over time. The second types are stocks and shares. They both offer their own advantages and disadvantages It is important to never put all your eggs in one basket, because one is more risky than the other. The best option is to invest an ISA of both types, and combine the two.
For those investing in smaller amounts of money, it may be better to simply invest completely in shares. However, for individuals on the higher end of the tax bracket, it is more beneficial to split your investments between shares and bonds.

A J(Junior)ISA is also perfect way for parents to invest for a minor. The JISA allowance is a bit less per year, but it allows the parents to have complete control of how the money is invested (in stocks or bonds). Later, the child can take control of the account when they turn 16 (as well as open their own NISA), but they must be an adult to withdraw any cash. This is the only way to theoretically exceed the maximum limit, because upon turning 16, children will get both whatever allowance is already in the account from the JISA as well as the 15,000 limit from the NISA.


  • Only income tax (capped at %10) is applied. Although only in certain circumstances.
  • Individuals avoid the capital gains tax on profits made from investing or interest. Investing outside of an ISA will incur capital gains tax of between %18 to as much as %28.