The limit amount a person can save in their ISA per tax year (April 6 to April 5 of next year) is £15,240. With this is mind, there are three kinds of ISA a person can choose from: cash ISA, stocks and shares ISA and innovative finance ISA.
This is just like a normal savings account where you can save money without the tax that is usually imposed on the interest that your money has earned in a year. As early as 16 years old, you can open your own ISA so you can start practicing the habit of saving up given that you won’t exceed the limit deposit in a year (see above).
Despite of this advantage, there are still a lot of people who refuse to open an ISA and stay in their current savings account with banks where they could be paying excessive taxes.
Stocks and Shares ISA
This type is where an individual can use his / her savings within the limit to invest in a fund that’s connected to the stock market. The good thing about this is you don’t have any responsibility of income tax or capital gains tax. The only down side is stock market is known to be volatile so your investment might go up or go down and you end up with less amount from your original investment.
Innovative Finance ISA
This is a kind of ISA that you can have together with your cash ISA and stocks and shares ISA. With Innovative Finance ISA, you can reinvest the earnings of your savings without the risk of getting taxed. You can do this multiple times. Same with stocks and shares ISA, you need to be 18 years old and older to get advantage of these ISAs.
You only need to have £1 to open your own cash ISA while stocks and shares ISA needs higher initial savings. You might be wondering if you have to keep your money in your ISA account for it to grow. While this can be true, you’re not actually obliged to do so. With the two available rates in ISA, you can choose whether you want to have instant access with your money with Variable rate cash or have higher interest rate with Fixed rate ISA but have to finish a term before withdrawing your money.
To know more which type of ISA and which kind of tax will better suit you, you can contact Thompson Financial Consulting to have a better idea which of the ISAs will give you the best returns depending on your financial capacity and status. Take advantage of ISA’s program with the help of Thompson Financial Consulting.