What is an ISA?
An ISA is a ‘tax-efficient wrapper’ designed to go around an investment. Types of ISA include a Cash ISA and Stocks & Shares ISA. A Cash ISA is like a normal deposit account, except that you pay no tax on the interest you earn. Stock & Shares ISAs allow you to invest in equities, bonds or commercial property without paying personal tax on your proceeds.
Some ISAs do tie your money up for a significant period of time. However, others are pretty flexible. If you’re after flexibility, variable rate Cash ISAs don’t tend to have a minimum commitment. This means you can keep your money in one of these ISAs for as long – or as short – a time as you like. This type of ISA also allows you to take some of the money out of the ISA and put it back in without affecting its tax-efficient status.
|• No tax liable on money invested or withdrawn||• The value of a Stocks & Shares ISA can go down as well as up depending on market circumstances|
|• Ability to save up to £20,000 each year||• No tax relief on the money you pay in|
|• Easy access to your money||• Maximum contribution £20,000 per year and cannot carry forward any unused contributions as you can with a pension|
|• Cash security ensured as part of the Financial Services Compensation Scheme limits||• Cannot be in joint names|
|• Potential investment growth||• Comparatively low growth potential of a Cash ISA|
|• Ability to move to and from a Cash and Stocks & Shares ISA||• Potential negative impact of inflation|
|• Flexible fund choices with a Stocks & Shares ISA|
|• Suitable for a range of risk attitudes|
|• Choice of investment for income, growth or both|
|• On your death, your spouse/civil partner may receive an additional ISA allowance to allow the value of your ISA to be reinvested|