What is an ISA?
An ISA (Individual Savings Account) allows one to save £10,680 a year completely tax free on the interest you earn. The government introduced these savings accounts in order to encourage people to invest and save their money.
To put the benefits of an ISA into perspective, if you have had an ISA every year since their introduction and commited the full allowance each year, you would have sheltered a whopping amount of £79,400 from the taxman, excluding any capital gains made. this I am sure is music to most people's ears.
There are two main types of ISA, Cash ISA's and Stocks and Shares ISA's. Both are explained in detail below:
Cash ISA
These type of ISA are basically savings accounts where the interest isn't taxed. Due to this it is highly unlikely for a normal savings account to give a higher return of ineterest than an ISA.
Like many savings accounts there are numerous cash ISAs available on the market, such as fixed rate, instant access and more. For more information on this give our offices at CRS Consultants a call.
Stocks & Shares ISAs.
Stocks and Shares are both eligible to be placed into an ISA account. This can provide two main tax benefits. Any profits made from the increase of share prices are not eligible for capital gains tax and secondly it allows for all the tax on bonds to be reclaimed
One common misconception is that an ISA needs to be held for a certain amount of time in order for it to be beneficial, however many accounts give instant access to your savings leaving the rest of the savings gaining interest. However it should be noted that once money is withdrawn, it cannot be replaced within that financial year.
This is a basic description of what an ISA is. For more information on ISAs or any financial services or products pop down to our offices at CRS Consultants or call us on 01606 48521.