If you managed to make use of your Individual Savings Account (ISA) allowance in the last tax year, then you will be pleased to know that as of 6th April, you have another £7,200 of potential tax free investments in which you can deposit into ISAs.
You may not have made use of last years tax free savings allowance, but don’t worry, you can still invest up to £7,200 either all into stocks and shares ISAs, up to £3,600 into a cash ISA, or a combination of the two, allowing you to benefit from tax free returns.
If you are unfamiliar with ISAs, it’s worth checking out how they work, as you could be paying unnecessary taxes on the interest you accumulate through savings.
ISAs give UK savers a great incentive to save, by offering a tax-free haven so you don’t have to pay a penny of the returns you earn to the tax man. Everyone over the age of 16 is allowed to invest up to £7,200 in ISAs every tax year (April 6th – April 5th), which can be made up of either a maximum of £3,600 per year into a cash ISA and the remainder into an investment ISA, or the entire £7,200 into an investment ISA.
Cash ISAs are very similar to savings accounts, with some providers offering higher rates for locking your savings away into a fixed rate ISA, while investment ISAs are more rare within the banking sector, but are beginning to come increasingly popular, as these provide the potential to earn higher returns on your investment. One thing to be aware of when dealing with stocks and shares ISAs is that you are given the opportunity to make massive returns in exchange for the risk that you could also lose money, and this is where they differ from cash ISAs.
There are a number of ways your account can be run, from where and when your interest is paid, to how often you will make deposits, and the level of access to your funds. These are all determined by the ISA account you choose. You can decide how you want to make deposits, whether they be monthly, or a annually, as long as you try to use up your allowance, as it cannot be carried over to the next year. Interest can also be paid monthly or annually, adding it to your current balance, or having it paid into another account.
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