Individual Saving Account (ISA)
ISAs are not products in their own right, but simply a tax efficient wrapper for your savings or investments. Through them you can hold stock market based investments or traditional cash savings.
How do they work?
To reward savers, any interest earned on savings or bonds, and any capital gains made on investments wrapped up within an ISA are tax free. It doesn’t matter if you’re a lower, basic or higher rate taxpayer; the tax advantages are the same. Best of all, you don’t need to include your ISA information on your tax return, saving you another headache.
Are there any limits?
You need to be over the age of 18 to take out an investment ISA. There is a maximum investment limit of £11,280 in an ISA within a single tax year (from 6 April to 5 April the following year).
What are the risks v returns?
The investment rewards and level of risk go hand-in-hand. Stock market based investments are not guaranteed and may fluctuate. However, any peaks or troughs should be averaged out through the duration of your investment.
Can I get at my money?
You can access your money at any time, but do remember, that dipping into your ISA fund, means using up some of that years allowance. If you have paid in the maximum, and take some money back out, you cannot top it up to the maximum again in that tax year.
What are the charges?
Equity ISAs may have an annual fee for investing your money in stocks and shares. That is usually deducted from the ISA itself. Check also that there are no exit penalties if you come out of the ISA arrangement early
Need more help?
ISAs sound complex because there’s such a wide choice available. Rather than considering them to be a product, think of them as the umbrella for your savings and investments, protecting you from incurring more tax. You can find out more by calling us.
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