ISA’s can be a great way of growing your savings or making some additional income, all without the hassle of paying extra tax, read to understand what’s available.
ISA’s and Types:
UK residents 16 or over can save up to £20,000 a year (for the 2018-19 tax year) into a cash ISA. Those aged 18 or over can save in a cash or stocks and shares ISA, or combination of ISA’s.
There are six main types of ISA’s briefly explained below;
There is a variety of cash ISA’s available, including instant access, regular savers and fixed-rate deals. Interest is always paid tax-free.
If you choose an instant access cash ISA, you can withdraw money whenever you like (but the interest may be lower because of this advantage).
Stocks and shares ISA’s
Such ISA’s give you the option of investing within Individual shares, Investment funds and Bonds.
Investing drip by drip at different intervals should allow you to smooth out the volatility in the stock market. To read about how to select the best DIY ISA click here.
Innovative finance ISA
Innovative finance ISA’s allow savers using peer-to-peer (P2P) or crowdfunding lending platforms to receive tax-free interest on their investments.
The potential rates of interest are higher than traditional savings accounts or ISA’s because of the higher risk profile of investing in new businesses or individuals. Crowd2fund is one of the many IF ISA’s.
Junior ISA’s let parents save and invest on behalf of a child under 18. The junior ISA limit is £4,260 per child for the tax year 2018-19, and parents can save this amount in addition to their adult allowance. Junior ISA’s can be cash or stocks and shares, with interest or investment gains paid tax-free.
Help to Buy ISA’s
Help to Buy ISA’s are a type of cash ISA designed to help people save a deposit for their first home. Savers are given an allowance of £3,400 in the first year of holding a Help to Buy ISA and £2,400 in subsequent years.
The Government will enhance the savings by a 25pc addition to allow up to a maximum amount of £3,000 in savings. To be qualified for the extra amount, the money in a Help To Buy ISA must be used to buy your first home.
Lifetime ISA’s (LISA’s) can either be cash or stocks and shares. This ISA is suitable for savers who are between the age of 18 to 40. The ISA has a £4,000 annual limit and the Government will add a 25pc bonus, up to a maximum of £1,000, each year. Contributions can be made up to the age of 50.
Clear House Accountants are specialist Accountants in London who believe in creating innovative solutions for Businesses to help them improve tax efficiency. They are advocates or creating smart accounting and tax solutions for businesses of all shapes and sizes in order to improve business performance and growth.
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