Compare Income ISAs
Select the best income ISA to invest this year’s tax free allowance.
Investment ISAs put your capital at risk & you may get back less than you originally invested
- Fund Choice: Popular corporate bond fund that pays a monthly income. Manager Sajid Vaid believes investment grade (high quality) company bonds may be the ‘sweet spot’ in the fixed income market, delivering modest income while keeping risks in check. Capital at risk.
- Invest From: £25 pm
Why we like it: A fund with a conservative approach to bond investing. The focus is on quality companies that are in good financial health and generate enough cash to keep paying bondholders. Aims to provide a relatively steady income and a small amount of growth, without taking excessive risks. It could help diversify a portfolio focused on shares, or be used as a way to limit volatility during tougher times for stock and bond markets.
- Fund Choice: High income yield fund suitable for long term investors drawing regular monthly income from their portfolios. Capital at risk.
- Invest From: £25 pm
Why we like it: If you are looking for a high income yield this fund is suitable for long term investors drawing regular income from their portfolios. With a focus on high yield bonds and shares, the fund manager is an experienced bond investor who has a flexible approach to seeking out the best income opportunities.
- Fund Choice: This fund portfolio is designed to achieve high and rising income by investing globally, primarily in equities, in any economic sector whilst participating in long term capital growth. Capital at risk
- Invest From: £25 pm
Why we like it: JP Morgan Asset management is one of the worlds largest and best known brands in investment management. The aim of this fund is to achieve high and rising income by investing globally primarily in equities in any economic sector whilst participating in long term capital growth.
- Fund Choice: HL blend their favourite equity income funds to provide investors an investment which aims to deliver long term returns & reliable monthly income. Capital at risk.
- Invest From: From £25
Why we like it: The Hargreaves Multi Manager High Income fund aims to deliver a high monthly income to clients by blending different types of funds and moving between different areas of the market when more attractive opportunities emerge. HL also aim to grow this income payment over time and therefore may invest in higher risk smaller companies they believe offer great potential for long term capital growth.
- Fund Choice: Aims to provide a dividend yield above the FTSE All-Share Index. Invests in UK equities judged to offer high yield, above average prospects of dividend growth and long-term capital growth. Income paid twice yearly. Capital at risk.
- Invest From: £25 pm
Why we like it: Getting paid a regular income is a priority for many investors. Whether you’re in retirement, or want to boost your existing income, an equity income fund could be right for you. Even if you do not need income now, you can opt to reinvest it to boost capital growth. An emphasis on dividends and dividend growth makes this fund a more traditional UK equity income fund, in our view, so it could help form the foundation of an income portfolio.
- Fund Choice: The fund aims to pay an attractive quarterly income and grow your investment by investing in shares of companies based in Asia & the Pacific region. Capital at risk.
- Invest From: £25 pm
Why we like it: If you are looking to access Asia’s exciting growth potential along with a regular income this fund may be for you. Focuses on larger, dividend-paying companies in developed Asian markets, including Hong Kong, Singapore and Australia. Invests in a small number of companies so each can contribute a lot to performance, which can increase risk. The fund aims to pay an attractive income and grow your investment. A focus on companies that tend to be more stable could help the fund fall to a lesser extent than some others when markets are weak. Jupiter has grown to be one of the UK’s most successful and respected investment management groups.
What is an income ISA?
An income ISA is a way of using your ISA allowance that aims to provide you with a regular tax-efficient income payment on your investment or savings. Income may be paid on a quarterly, semi-annual or annual basis, so you can choose an option to suit your savings goals.
Every eligible person has an ISA allowance. You are permitted to invest all or part of this amount in an investment ISA, all in a cash ISA, or some in a cash ISA and the remainder in stocks and shares.
A stocks and shares income ISA might be for you if…
- You want to use your ISA allowance to maximize your potential for investment returns, especially at this time of low interest rates. The money you invest in an income ISA offers tangible tax savings. You pay just 10% tax on any income from your investments, regardless of your tax bracket.
- You have substantial savings – i.e. in excess of £10,000 – to transfer into the ISA. Capital gains are 100% tax-free, which is a real advantage if you want to hold shares and increase your ISA amount over the long term.
- You’re looking to invest for the medium to long term – investment-based accounts generally perform better over time than cash-based accounts, but to achieve this it’s likely you’ll need to leave your money untouched for at least a minimum period of one year.
- You’re saving with your retirement in mind. Many people use their yearly ISA allowance to invest in shares that can then be sold in the future to buy income funds – the result of which can be a tax-free income during retirement. In fact, recent data shows that savers are now putting more money into ISAs than into pension schemes.
A cash income ISA might be for you if…
- You want a completely tax-free savings account – you pay no tax at all on the interest you earn in a cash-based income ISA.
- You’re not confident about investing in stocks and shares and want to avoid some of the potential issues, such as fluctuating market.
- You want to combine a straightforward, tax-free cash savings account with the benefit of regular income payments.
An income ISA might not suit you if…
- You’re only saving for a short-term goal, such as a holiday. Because the income on your ISA pays out at regular intervals – for example, once a year – you may miss out on the benefits of this if you withdraw earlier. If you do decide to use an income ISA for a short-term savings goal, make sure you choose one that pays out income at more frequent intervals, such as once every quarter.
- Your first priority is to establish an emergency fund that you can easily access if something unexpected occurs. In this case, an instant access cash ISA might be more suited to your requirements.
Whatever kind of ISA you are interested in, as there are a wide range of products, it is worth shopping around to try and find the one that fits your specific needs best. You can view a selection of different kinds of ISAs by using the comparison tables on this website.
Frequently Asked Questions
Can I withdraw my dividends from my ISA?
Yes. Most providers allow you to have dividends automatically paid out to your bank account upon receipt. You can also have them reinvested automatically, too.
Do I pay tax on a monthly income ISA?
No, all payments from an Income ISA is completely free from tax.
How much can I invest in a monthly income ISA?
The annual ISA allowance is £20,000 for the current tax year.
Will I receive dividends from a Stocks and Shares ISA?
Whether you receive dividends from your Stocks and Shares ISA will depend on the underlying investments you hold inside it. If your investments generate dividends, then you can opt to withdraw these automatically to your bank account tax-free if you wish.