What is an ISA?
Using an ISA means you pay no income or capital gains tax on any interest or returns you make.
An ISA is not a type of investment; it is an amount of money that you can protect from tax each year. Where you save or invest this money is up to you.
How much is the ISA allowance?
For the 2019/20 tax year the total ISA allowance is up to £20000
The full amount can be invested in either a Cash or a Stocks & Shares ISA, or be split between the two types.
- Cash ISA
- Deposit based tax free savings account
These investments do not include the same security of capital which is afforded with a deposit based savings account.
Stocks & Shares ISA
Money is invested into funds investing into various asset classes other than cash such as Equities, Corporate Bonds, Gilts and commercial property. The value of these assets can rise and fall.
Junior Cash ISA
Junior cash ISAs are tax-free savings accounts for children. With a junior cash ISA, parents, family and friends will be able to deposit up to £4,260 tax year 2019/20’ to save for the child’s future.
You can choose from a Stocks and Shares ISA, a Cash ISA, or a combination of both.
The child will receive control of all monies at age 18.
Lifetime ISA allowances
Aimed at savers aged 18-39
Each individual may contribute up to £4,000 each tax year.
For every £4 you invest you will receive a £1 top up from government. You could receive a maximum of £1,000 per annum from the government, monies must by used to buy a house or be used for retirement when age 60 or more. Penalties will apply if not used for these 2 purposes.
- By incurring a Lifetime ISA Government withdrawal charge you may get back less than you paid in.
- By saving in a Lifetime ISA instead of a qualifying pension scheme you could lose contributions by your employer, if any.
Saving in a Lifetime ISA may affect your entitlement to current and future means tested benefits
Help to Buy ISA
This can provide first time house buyers a government cash bonus of up to £3,000. You may save up to £1,200 in the first month and then up to £200 per month in subsequent months.
The value of your investment can go down as well as up and you may not get back the full amount invested