By Ellie Price
Financial Advisor
Blog: grovelyfinancial.co.uk
An ISA is simply a savings vehicle, specifically one that offers tax efficiency on those savings.
Once funds are held within an ISA wrapper, the growth on the money is free of capital gains tax, and the withdrawals you take from the ISA are free of income tax. They are not free of inheritance tax, other than between spouses.
You can now save a healthy £20,000 per person per tax year in your ISA, and this can be split across cash and stocks & shares ISAs, as long as the total doesn’t surpass £20,000. And within flexible ISAs, you can make withdrawals, and so long as the money is returned to your ISA in the same tax year, it doesn’t count towards that year’s total allowance – check first that yours is a flexible ISA.
Should you have one? This will depend on your tax position, but there is no drawback to holding savings in an ISA wrapper. A cash ISA is usually free of charge to open and manage and offers equivalent (historically better) rates than a cash savings account.
A stocks and shares ISA is like a general investment account and again, the costs to run are broadly equivalent.
But, if you are a non-tax payer, you would not receive any tax benefit from an ISA wrapper and, in the current low interest rate world, if you are considering cash investments, interest rates may be better in fixed term accounts than ISA accounts.
The range of available ISAs has been extended to include Help to Buy ISAs, Lifetime ISAs and Junior ISAs for under-16-year-olds, so you may want to explore the differing types of ISA to best suit your needs.
To discuss your saving and investment needs, including ISAs, call Ellie on 01722 653245 or email ellie@grovelyfinancial.co.uk.
The benefits to the treatment of tax will depend on your individual circumstances and may be subject to change in future. Investments may rise as well as fall and you may not get back what you originally invested.
Grovely Financial Ltd is an appointed representative of Vision Independent Financial Planning Ltd which is authorised and regulated by the Financial Conduct Authority.
Firm reference number 487395.