S&P Opinions

What is an ISA?

By March 17, 2020 April 2nd, 2020 No Comments
ISA Blog

Saving for your future just got a whole lot easier thanks to ISAs, or Individual Savings Accounts. An ISA is a cash savings, investment or peer-to-peer lending account that accumulates tax-free interest throughout the financial year.

Read our blog to learn how ISAs work and book a meeting with Shalchi & Partners to open the ISA that’s right for you. We’ll help you save and invest your money wisely so you can accomplish your financial goals.

How Do ISAs Work

ISAs can be opened with a bank, building society, insurer or asset manager during the UK tax year, which begins on April 6 and ends on April 5. At the start of every financial year, you’ll receive an ISA Allowance of £20,000 to invest and save how you like. You can only have one “active” ISA, so you’ll need to decide whether you want to invest and save fully in one ISA or split your ISA Allowance between a variety of different ISA accounts. If you do choose to mix and match ISA accounts, the overall amount you invest in your accounts can’t exceed your ISA Allowance of £20,000.

There are currently five types of ISAs that accumulate interest-free savings throughout the tax year:

  • Cash ISAs
  • Help to Buy ISAs*
  • Innovative Finance ISAs
  • Stocks & Shares ISAs
  • Lifetime ISAs

*As of November 2019, Help to Buy ISA’s are no longer available, however people who still hold a Help-to-Buy ISA can continue to contribute until 30th November 2029.

ISAs with a £20,000 Allowance

Cash ISAs, Innovative Finance ISAs and Stocks & Shares ISAs offer an ISA Allowance of £20,000. The difference between the three is that Cash and Innovative Finance ISAs offer tax-free interest savings, whereas Stocks and Shares ISAs offer both tax-free interest savings and tax-free gains.

ISAs with a £4,000 Allowance

The downside of both Lifetime Cash and Lifetime Stocks & Shares ISAs (LISAs) is that you’re only granted a £4,000 allowance, as opposed to £20,000. Like Cash and Stocks & Shares ISAs, LISAs offer tax-free interest savings. The main difference is that only 18-39 year olds can open these accounts. LISAs are government-backed schemes, so you’ll also enjoy a 25% bonus at the end of every tax year for opening an account.

Junior ISAs

If you want to help save for your child’s future, you can open a Junior Cash or Junior Stocks & Shares ISA for children under 18. Both types of Junior ISAs come with a £4,368 allowance and offer tax-free interest savings. The massive differentiator and benefit of Junior ISAs is that 16-18 year olds can also open an adult Cash ISA, which grants them an additional £20,000 ISA Allowance. This means that your child would receive an overall ISA Allowance of £24,368.

At Shalchi & Partners, we offer an unrivalled Savings & Investments service. We’ve helped countless clients open and grow their ISAs, so book a meeting with us to learn how we can help you grow your money today. Financial success is just a click away!

Disclaimer: Shalchi & Partners Limited is authorised and regulated by the Financial Conduct Authority. The value of investments can go down as well as up.