Urgent warning issued to everyone with one type of bank account | Personal Finance | Finance

An urgent warning has been issued to everyone with one type of ISA.

ISAs, or Individual Savings Accounts, are a tax-free way to save up to £20,000 per year and keep it from being taxed.

It means that you can add up to £20,000 to an ISA – or several ISAs as long as the total amount put in does not exceed £20,000 in a single financial year – without paying any tax on the interest you gain, even if you have used up all of your Personal Allowance.

Personal Allowance is the amount you can save tax-free, and for a basic rate taxpayer is £1,000, and for higher rate is £500.

But ISAs can gain more interest than this with no tax to pay, because money inside them is protected.

However, today people with Stocks and Shares ISAs are being warned.

A global stock market dip has seen the value of various investment funds, both managed funds and index trackers, sharply drop by several percentage points.

It means that the value of your investments has almost certainly gone down today.

And although the advice on investing is generally not to sell and try to ‘time the market’, there will be some who rush to dispose of investments before they lose more money this week.

But if you sell your investments because you think the market will dip further, then you buy them back later, this will burn up coveted ISA allowance.

As Triodos Bank explains: “When you take money out of an ISA, you usually lose the ISA status. This means you can’t put that amount back into the ISA without it counting as a new ISA subscription. For example, if you put £20,000 into an ISA and then took £10,000 out in the same tax year, you wouldn’t be able to put it back in until the next tax year when you get your next allowance. Some Flexible ISAs, such as the Triodos Cash ISA allow you to put cash back in within the same tax year, but the Triodos Stocks and Shares ISA doesn’t.”