Individual Savings Accounts (ISAs) were introduced in April 1999 to replace old style PEPs and Tessas. Many people think the ISA as a complex financial product, and get scared off. The ISA is simply a tax free vehicle where you can place cash or shares.
If you’ve got any savings, or investments, you should have an ISA, simple as it saves tax and therefore increases returns.
There are two types of ISA:
- Cash ISAs are best described as savings accounts where the interest is not taxed, so for basic rate taxpayers, this is 20%, 40 % for higher-rate tax-payers, and 50% for additional rate taxpayers.
- Stocks and Shares ISAs can hold an investment fund or funds, or individual stocks and shares. This type of ISA carries risks, and should be regarded as a medium to long-term investment.
There are limits to how much you can invest in an ISA. Every person over the age of 16 (18 for share ISAs) has an ISA allowance, which cannot be exceeded.
This limit is currently £11,280, of which £5,640 can be invested in cash ISAs between 5th April of each tax year.
For advice on how to make the most out of investing in ISAs, call us now.