What is an ISA?

ISAs allow people to save their money in a combination of cash and stocks and shares. Unlike investing directly in these products, investing through an ISA provides certain benefits. An ISA is often referred to as a tax wrapper which goes around your savings, protecting them from paying certain taxes.

There are two types of ISA available – a Cash ISA and a Stocks and Shares ISA.

  • A Stocks & Shares ISA will reflect the performance of the stock markets and will rise and fall in value.

  • A Cash ISA carries a lower risk as your capital is safe but if interest rates are lower than inflation you could still lose money in real terms.

A Stocks and Shares ISA is suitable for long term investing, usually 5 years or more, and generally provides better returns, although not guaranteed, than Cash ISAs. If you need to access your savings in the next few months, then a Cash ISA may be more suitable for you.

Key ISA Facts

The annual ISA allowance for the current tax year, 2019/20 is £20,000 and you can start with as little as £1.

You pay no Income Tax or Capital Gains Tax on ISA proceeds. In fact, it does not even need to be recorded on your tax return!

ISAs are individual accounts and you cannot hold an ISA jointly with anyone else, or hold one on behalf of another person.

You can split the annual ISA allowance as you wish between a Cash ISA and Stocks & Shares ISA.

You can transfer from a Stocks & Shares ISA to a Cash ISA, and vice versa.

Junior ISAs (for those under the age of 18) – the annual Junior ISA allowance is £4,368 for the current tax year, 2019/20.

You must be aged over 18 to take out an ISA (if you are aged 16 or over you can invest in the Cash ISA) and you must reside in the United Kingdom for tax

To find out more or get started give our customer services team a call on 08085 498 477 or visit our website www.financialdiscounts.com

This article is for information only and reflects the author’s views at the time of writing, which are subject to change. This should not be regarded as a recommendation or solicitation to invest. If you are in any doubt about the suitability of an investment for your needs, you should seek professional advice.