And other ISA benefits
Most doctors and dentists are familiar with ISA’s since their creation in 1999. Whilst rates are admittedly not the best in current market conditions, they are still a worthwhile savings vehicle, if only for the reason that income earned is tax free. The new ISA’s are also more flexible so can be part of a short, medium or long term strategy.
Are you maximising your ISA benefits?
Key ISA benefits for doctors and dentists
The number one benefit for anyone investing in an ISA is that the income earned is free from income tax, unlike interest earned from investing in regular savings accounts.
Stocks and Shares ISA’s typically have a higher financial benefit, however the risk is also usually higher, so they don’t suit everyone. Doctors and dentists with a Stocks and Shares ISA can invest in unit trusts, investment trusts and bonds and see a return on their investment which will vary depending on the conditions of the stock market.
A Cash ISA is more beneficial for a risk adverse investor. It operates like a savings account, only that the interest earned is again, tax free. Doctors and dentists with a Cash ISA can save and earn income from their savings fund, whilst not exposing themselves to economic peaks and troughs.
From Autumn 2015, transfers can now be made within the tax year, between Cash ISA’s and Stocks and Shares ISA’s, adding a further flexible benefit. Rules apply.
Which type of ISA would suit me?
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Maximising the benefits of your Cash ISA
The current limit (15/16) for total ISA savings is £15,240.
Read more: Mini guide to your 2015 ISA
Changes made to legislation now enables investors to save 100% of this into a Cash ISA if they choose. Previously, there was a separate limit for investment in a Cash only ISA so this change has certainly opened opportunities for the more cautious investor, or if quick access to funds is required.
To maximise the benefit is to simply utilise as much of the annual allowance as is affordable. This in fact applies whether using a Cash ISA, a Stocks and Shares ISA, or a combination.
Only one ISA is able to be opened each tax year, however over the long term there is no limit, so in other words, a new ISA can be started each year with the funds left accumulating until required.
Maximising the benefits of your Stocks & Shares ISA
Stocks and Shares ISA’s can give much greater financial rewards in exchange for the risk of dabbling in the stock market.
Using a financial adviser to assist with this can help maximise your benefits, but it is also important to recognise that it is possible for investments to go down as well as up, so a long-term approach is typically required.
As with a Cash ISA, using as much of the annual allowance that can be afforded each tax year, is one way to continue growing your savings in a tax efficient way.
How do you plan to use your ISA benefits?
ISA’s are now much more flexible so many doctors and dentists choose to use them as a short or medium term means to stash away the cash for perhaps a deposit on a home, property improvements or to cover private education for their children.
ISA’s can also be used to achieve longer term goals though, like having excess money to draw down-on in retirement.
Before you go…
Don’t forget to download our free FactSheet all about ISA’s.
Dental & Medical Financial Services have expert knowledge of investment planning. Call to speak with Darren, specialist and independent financial adviser.
Tel: 01403 780 770