Individual Savings Accounts (ISAs) have been around since 1999 and are tax-efficient investment wrappers in which you can hold a range of investments, including bonds, equities, property shares, multi-asset funds and even cash, giving you control over where your money is invested.
ISAs are a highly tax-efficient way to save or invest your money because you don’t pay Income Tax on your interest or Capital Gains Tax on any profits.
Between 6 April 2016 and 5 April 2017, you have an ISA allowance of £15,240. The rules now mean you can split the ISA allowance as you wish between a Stocks & Shares ISA and a Cash ISA.
You don’t have to declare any investments held in ISAs on your tax return. This may not seem like much, but if you have to file an annual tax return, you’ll know that any way of simplifying your financial administration can be very helpful.
ISAs are becoming an important part of financial planning, and they offer a unique range of benefits.
It is important to remember that an ISA is just a way of sheltering your money from tax – it’s not an investment in its own right.
If you want to change your existing ISA provider or are looking to consolidate your investments under one roof, with an ISA you can transfer your investment between providers to suit your individual needs. However, your current provider may apply a charge when you transfer your investment. While your investment is being transferred, it will be out of the market for a short period of time and will not lose or gain in value.
ISAs can give you control over your retirement income, as you can take as much money out as you require, whenever you want. Savings in an ISA and withdrawals from an ISA are tax-efficient, but, if you withdraw money and put it back later, it will count towards your ISA annual subscription limit in the year that you re-invested your money.
Junior ISAs offer investors a straightforward way to save for a child’s future and offer similar tax advantages to ‘adult’ ISAs, but with a lock-in – making the child’s investment inaccessible until they turn 18. Like an ISA, Junior ISAs can invest in bonds, equities, cash, property and even multi-asset funds, giving you even more flexibility over the future of your child’s long-term savings.
Since April 2015, it is possible for existing Child Trust Funds (CTFs) to be transferred into Junior ISA accounts.
You can invest up to £4,080 in the current tax year and switch from a Cash Junior ISA to a Stocks & Shares Junior ISA and back again.