Today, many people are approaching the investment market in order to give their savings a chance to mature over the years. If only a few years back stockholders could only open classic investment accounts, today it is possible to choose from a wide range of different accounts, each of which is intended for a certain category of investors. Among these accounts, Individual Savings Account (ISAs) are currently growing in popularity.
Let’s have a look at ISA’s main features.
- ISAs are particular savings accounts that also give the holder the chance to invest in a wide variety of investment areas. As a matter of fact, the account holder will be able to choose the best financial fields according to his needs, budget and risk tolerance.
- Regardless of the type of account you’ll decide to open, ISAs come with many tax benefits: as a matter of fact, they are special tax-free savings accounts which will give you the chance to save or invest money in a tax-efficient way.
- If you need to withdraw the money put into a fund, you should know that are some flexible ISAs which let you take the money out and put it back in the same tax year without affecting the annual allowance. In you want to find out more about ISA withdrawal, check this article.
- Even though every ISA is different from the others, there’s a rule that applies to all of them. In fact, every account comes with a restriction on the highest sum that can be deposited in a year. Today, this sum is set at £20,000 per year for most ISAs, and at £9,000 per year for Junior ISAs.
- When opening an ISA, you can choose a special tax-free account designed exclusively to save money called Cash ISA.
- ISAs come in many different types, which have been created to meet the needs and preferences of as many people as possible.
The many types of ISAs available for British residents
Let’s have a look at the many kinds of Individual Savings Account available in the UK.
The Stock and Shares ISA is surely the most common type of ISA. It is really similar to a regular investment account which lets you invest in stocks, shares, land, real estate, bonds and more. However, it is a tax-free account, so you won’t have to pay any tax on the money you earn from investment.
A Cash ISA on the other hand is really similar to a regular savings account which, however, lets you earn tax free interest.
The Lifetime ISA is a specific type of savings account meant for life-related purchases. In fact, if you want to put money aside to buy a new house or for retirement, this may be the right account for you.
Innovative Finance ISA, on the other hand, allows the holder to lend money to borrowers with the goal to get it back with interest.
The Junior ISA is a savings account meant to put money aside for underage children. Both parents or legal guardians can open it, and other family members and friends can contribute as well. In this case, the annual allowance is set at £9000 per year.
