individual savings accounts

Making ISAs Work For You



Posted on: 16th February 2023

Individual Savings Accounts (ISAs) were introduced towards the end of the last century as a tax-free way to save into a cash savings or investment account. There are different types of ISAs, but the right one for you personally depends on your own financial goals.

It can be hard to understand which one is the best for you, but with the help of independent financial advisers Manchester, it can be much easier to comprehend.

Cash ISA

A cash ISA option works the same way as a traditional savings account, with the difference being that you won’t pay tax on the interest earned.

Over the 2021-2022 tax year, each person had an ISA allowance of £20k. To take cash out of an ISA, you need to be a UK resident and over the age of 16. If the allowance is not used before the tax year ends, you will end up losing it and will have to start anew on April 6th. Some ISAs have instant access whilst others have a fixed rate.

You can only open one cash ISA each year but can transfer to another cash ISA or a stocks and shares ISA with a different provider.

Stocks and Shares ISA

With these types of ISAs, you can hold investments such as shares, bonds and funds as a variety. Just like Cash ISAs, you save up to £20k each year tax-free but you get to choose which investments are put inside – and it is best to get financial advice on this.

With Stocks and Shares ISAs, you have to be 18 or over to have eligibility, and they stand as an option for those looking to avoid the impact of inflation on returns. Over time, there is a better potential for returns for this type of ISA, although with greater risks. If you want to invest in a stocks and shares ISA you need comfort in the possibility towards loss and longer-term investment.

Lifetime ISA

The Lifetime ISA is commonly used by first-time buyers looking to source a deposit for a property, or as something took tax-free at the age of 60. As well as paying interest, LISAs benefit from a 25% bonus from the government that encourages saving towards a home or retirement.

The maximum able to be put in every year is £4k, coming out of your £20k ISA allowance. This can be opened by anyone aged between 18-39, with the ability to save in one up until the age of 50. You can also get a bonus of £1k every year up to the age of 50, with people who open up at the age of 18 ending up with a maximum of £32k.

Additional ISAs

A Junior ISA is ideal for putting money away for your kids, available to anyone under the age of 18 and offers much higher rates than adult accounts, with a few restrictions.

An Innovative Finance ISA investment is where the company offering the ISA will use the money for borrowers or businesses in peer-to-peer lending, offering you a rate of interest from the borrower when paying back the money you have invested.

As you can see there are plenty of conversations around ISAs to be had to find something suitable for your own circumstances and comfort levels. Our independent financial advisers Cheshire will help you and your family find the right product to suit those needs and financial situations.

Contact our team at Haven IFA today for all the information you require on individual savings accounts.

Posted in ISA