WHEN YOU’RE looking for sound investment plans and want to discover more about opening an ISA or how to best manage an existing one, it’s important to know exactly what to expect within each of the options available to you. Finding an ISA isn’t as complicated as you might think. It’s all a matter of knowledge. Here are some of the more commonly asked questions about ISAs for you to plan ahead and begin your investment journey.
What ISAs are available?
Generally speaking, these are the main kinds of ISAs to choose from:
A Junior ISA: This is an ISA that can be opened on the behalf of a child. People can contribute up to £9,000 per year tax-free to these kinds of ISAs. When the child turns 18, they are legally classed as an adult and will be able to access the funds inside of the ISA. Junior ISAs can be either Cash ISA or Stocks and Shares ISAs.
A Cash ISA: A Cash ISA is close to how a more traditional savings account might work, except you earn tax-free interest on the savings you put into them. You can put up to £20,000 per tax year into a Cash ISA.
A Stocks and Shares ISA: This kind of ISA uses the funds you put into it to invest in the market. The amount can increase or decrease depending on market fluctuations. These ISAs are aimed at people with long-term investment goals, usually under the guidance of a financial adviser.
A Lifetime ISA: Lifetime ISAs allow you to save within the limits of the ISA (currently £4,000) while getting a 25% bonus from the government based on what you save each year. This ISA is aimed at people looking to either make a payment on their first home or keep it until they turn 60.
How much money can I put into an ISA?
While these numbers are susceptible to change as per the government, the limits currently stand at £20,000 per tax year for standard ISAs and £9,000 per year for Junior ISAs. Contributions to ISAs, particularly Junior ISAs, can be made by anyone. However, the combined amount of contributions from others will still need to be within the limits of the amounts stated above.
What is the difference between a Cash ISA and a Stocks and Shares ISA?
As mentioned above, a Cash ISA will allow you to save without paying income tax on the interest you’re getting from it. The funds are kept much like how funds are kept in a standard savings account. But with a Stocks and Shares ISA, your investments can rise and fall based on many variables, including market volatility and the success of the investments made. These ISAs allow you to save without paying Captial Gains Tax on the profit. Stocks and Shares ISAs are for long-term savers looking to invest for at least 10 years or so.
Final Thoughts
With so many common finance questions being asked, it’s vital that you find the right answers to your questions before making any decisions. Once you’re sure of what’s best for your needs, you can begin to invest your money more wisely in an ISA that’s catered to you.
