ISA’s have been around for a while and remain one of the most popular investment options available. Over the years, different types of ISA’s have come onto the market and the rules surrounding them have changed. It is easy to become confused about what you can and can’t do.
This does not constitute advice and advice should be sought in all instances before acting on it.
What is an ISA?
ISA stands for Individual Savings Account. They are very popular because you can save money without paying tax on the interest you earn. You also do not have to pay tax on the capital gains you earn from the investment.
Options available
The four main types of ISA’s available are:
- Cash ISA – primarily used for saving cash in a low risk environment. The benefit is that you can withdraw some or all of the money at any time.
- Stocks and Shares ISA – sometimes referred to as Investment ISA’s or Equity ISA’s. They are frequently used to boost retirement savings or as a way to boost pension savings.
- Innovative Finance ISA – this is a new type of ISA. They are little riskier as they give you the option to use peer-to-peer lending platforms to get tax free returns. You must be over 18 years to open an Innovative Finance ISA.
- Lifetime ISA – available to those over 18 but under 40 and who are wanting to save money to buy their first home or are looking to save for retirement.
To open an ISA, you have to be over 16 years, apart from the Innovative Finance ISA and Lifetime ISA where the minimum age is 18 years.
ISA allowance
The total ISA allowance for the tax year 2017/18 is £20,000. You can choose to invest this amount in one type of ISA or spread it across the different options available.
Use it or lose it
Whatever your reasons for wanting to save money, e.g. to put down as a deposit for a house, or to put towards your retirement, it makes sense to use a system where you don’t have to pay tax on the gains you make from the investment. That’s why it makes sense to use your full ISA allowance each year.
Plus, it is not possible to carry over any unused ISA allowance into the next tax year. So, if you don’t use it now you will lose it!
Discuss your investments with a specialist
Dental & Medical Financial Services have been helping doctors and dentists with their investment planning for over 25 years.
Tel: 01403 780 770