Individual Savings Accounts are a great way to help you save money and tax. For the 2021/22 tax year, you can contribute up to £20,000 across the different types of ISAs. While many people fall back on the standard Cash ISAs, don’t forget that you should treat your savings plan the same as your investment portfolio. Think about branching out with a Stocks and Shares ISA.
This does not constitute advice and advice should be sought in all instances before acting on it.
Stocks & Shares ISA overview
While a regular cash ISA is basically just a savings account you’re not required to pay taxes on, a stocks and shares ISA allows you to grow your money.
With your maximum allowance, you can invest part of it into funds (shares or bonds from a variety of companies combined under one investment umbrella), bonds (a loan to a company or government, essentially), and shares in individual companies. You don’t pay dividend, capital gains, or income tax on any profit you make from your investments in your stocks and shares ISA.
Still an investment
While it certainly is a way to save money and tax, remember that contributing to a stocks and shares ISA is still investing. If you’re comfortable with the level of risk associated with investing and won’t require your money for a while (at least five years) then it could be the right option for you.
As with regular investing, you’ll need to be prepared to weather the storm of the stock market. Historically, cash savings haven’t been able to keep up with the performance of the market, but there’s no guarantees for the future.
The more risk you take, the greater return you can usually expect, but as usual, don’t forget to diversify.
While you need to remain confident in your selections despite volatility, routinely check in on your portfolio to weed out any consistently underperforming funds and find new ones to invest in instead.
Don’t forget that your ISA allowance expires at the end of every tax year.
You need to use it or lose it, no matter how you choose to divide your contributions. If you need help deciding how exactly to save or invest your money, get in touch with us. As part of our commitment to our clients, we’re dedicated to ensure your financial strategy includes ways to not only build and grow your wealth, but save on tax, incorporating it all into one cohesive plan. Get in touch to get started today.
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