What to Know About ISAs

(froy). Submitted on Wed, 1 Feb 2012

Since Individual Savings Accounts (ISAs) were introduced in the UK in 1999, they have been extremely popular, making tax-free saving available to all. Their biggest strength is their simplicity, and this been a driving factor to their rise in popularity. Plus, with the introduction of junior ISAs (JISAs), children aged 16 and above are now able to begin saving in an entirely new way. ISAs are government-backed, and most importantly, are tax free, which means that many people choose this as their primary method of saving. ISAs come in two distinct types, cash or stocks and shares, and depending upon your level of risk-aversion, you can choose the ISA that is right for you.



Cash ISAs are the simplest option, and involve you using your ISA as a savings account. With a cash ISA, you simply pay money in as and when you are able, and you receive interest on your investment. With a stocks and shares ISA, your invested money can increase and decrease based on a variety of criteria. Each ISA manager will be able to inform you of what your stocks and shares ISA is being used for and will guide you as to the risk level involved.

The investment limit of an ISA changes each year, in line with inflation, although in the tax year 2012 to 2013, the cash limit will be £5,640 and the stocks and shares ISA limit will be £11,280. Therefore, an ISA represents a great way to save across the course of a year, and this limit is only the amount deposited per tax year; so it can, of course, be exceeded over a number of years. Similarly, a junior ISA is designed to get someone aged 16-18 saving money, and this has a limit of £3,600 per year. However, a junior ISA is only offered as a cash saving ISA, and not as a stocks and shares ISA.

An ISA is generally considered to be a safe and secure way to invest. The fact that no tax is paid on savings means that it is a great way to keep your investments or your savings away from the Inland Revenue. In addition, if you choose a stocks and shares ISA, using your money to make you more money can yield rewards, although it's important to recognise that there is some risk involved in this option. ISAs are usually recommended for anyone who is serious about saving and/or investing for the future.

 

About the Author

The author of this article is a part of a digital blogging team who work with brands like Northern Rock. The content contained in this article is for information purposes only and should not be used to make any financial decisions.

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