What is an ISA?
ISA, or an Individual Savings Accounts to give them their full name, are a scheme allowing relevant UK individuals to save tax efficiently. In the UK there are two types of ISA available; these are cash ISA and a Stocks and Shares ISA.
An ISA allows individuals to hold cash, shares and unit trusts free of tax on interest and capital gains. ISAs replaced PEPs (Personal Equity Plans) and TESSAs (Tax-Exempt Special Savings Accounts) back in 1999.
A cash ISA is made up entirely of cash deposits. Due to the nature of the investment these are considered to be very low risk however, the returns are usually lower than that of a stocks and shares ISA. These can be more suited to shorter investment terms.
Stocks & Shares ISA
Investing into a Stocks and Shares ISA offers the option to invest in thousands of different investment funds. It is important to bear in mind that with a stock market investment, the value can fall as well as rise so it is important then when investing in a stocks and shares ISA you invest according to your attitude to risk. Stocks and shares ISAs should also be considered as medium to long term investments i.e 5-10 years ideally.
It is also advisable to use as much of your ISA allowance as you can afford to each year because returns are tax efficient and you can’t carry over any unused allowance to the following tax year.
Help to Buy ISA
The ISA scheme introduced by the government in the April 2015 Budget to help first time buyers get onto the property ladder.
For more information on Help to Buy ISA please see the relevant page – Help to Buy ISA
How can you split the ISA allowance?
From 1st July 2014 the ISA allowance rose to £15,000 and under the new ISA rules all of this allowance can be invested into a new cash ISA called a NISA (New Individual Savings Account). Alternatively, the whole amount can be invested into a stocks and shares ISA or you can split the allowance over the two types of ISA, you can have one of each per tax year.
This is only a brief overview of ISAs and when investing its important you consider your individual circumstances in terms of tax position, individual needs as well as your attitude to risk. For more information and to discuss your options further please don’t hesitate to contact us.
Need more information on setting up an ISA?
Give the team a call on 01332 223888 or email us at email@example.com – Alternatively, please complete the form below and a member of the team will come back to you shortly: