Is An ISA Worth Having?

Over the years you may have heard that ISAs have built up a bit of a reputation for offering very little, but the invested ISAs of 2019 actually provide a simple, robust saving platform with excellent tax-saving benefits – with the opportunity for some significant growth if managed effectively.

What is an ISA?

ISAs or Individual Savings Accounts are a savings vehicle which have distinct tax advantages.

There are a few types of ISA you may have heard of, for example:

• Cash ISA
• Lifetime & help to buy ISAs
• Innovative finance ISA
• Junior ISA
• Stocks & Shares ISA

What they all have in common is they offer tax free growth & withdrawals, meaning any growth is tax free & you will not pay any tax when withdrawing either.

This can make them a powerful tool for achieving your financial goals & building a tax efficient financial plan for the future.

The tax-free annual allowance

All ISAs have an annual allowance. This is the amount you can pay into an ISA per tax year & is currently £20,000.

This annual allowance is per person, per tax year thus it is the total that can be paid into any types of ISA in a tax year e.g. if you pay £10,000 into your Cash ISA you only have £10,000 left to pay into your Stocks & Shares ISA. (The only exception to this is the Junior ISA which has an annual allowance of £4,368 per tax year.)

The allowance has increased dramatically over the years from as little as £2,400. Thus it’s becoming increasingly easier for people to shelter large amounts of money from tax each year.
It’s estimated that over 1,000 people in the UK are now ISA millionaires, having followed some dedicated savings habits & contributing the maximum allowance each year in funds with strong returns.

Cash ISA Vs Stocks & Shares ISA

If you have held an ISA though a bank chances are fairly high that this was a Cash ISA whereby the bank pays a certain amount of interest each year, not unlike a savings account.

Although fairly popular in the past, (due to the guaranteed nature of interest payments) they are less attractive in the current climate given the current low interest rates in the UK. In fact once inflation has been factored in, much like cash sat in a bank account these ISAs have lost buyer power over the years.

A Stocks & Shares ISA as the name suggests is an ISA which is invested in the stock market. Although growth is not guaranteed on average Stocks & Shares ISAs achieve much higher growth & importantly have a much higher chance of beating inflation.

Withdrawing money from an ISA

There is no limit to the amount or timing of withdrawals for Stocks & Shares ISAs making it a very flexible and versatile investment.

Utilising existing investments

You can also use funds invested in other accounts e.g. General Investment Accounts or cash savings plans to top up your Stocks & Shares ISA by transferring directly from these accounts. By transferring, you will benefit from the tax-efficiencies of an ISA and typically better returns on Stocks & Shares than in cash.

How to get started?

If you would like to find out more about how you can utilise ISAs to achieve your financial goals we offer a free initial consultation to discuss your options.
Call us on 0161 437 5999 or email us for more information.