Money to save? How can ISAs help you towards your financial goals?
You may have cash investments or OEIC or Unit Trust funds, but holding these investments in ISAs is beneficial as they have special tax exemptions.
What are the tax advantages of ISAs?
ISAs (Individual Savings Accounts) allow your savings to grow in a tax efficient environment – so that means your money will not lose out due to Capital Gains Tax or Income Tax (from either dividends or interest).
How much can be paid into an ISA?
Every individual has an allowance for each tax year – £15,240 for the 2016/17 tax year, which can be spread across different ISA options.
If you have used your allowance for this tax year, you can save for:
· a spouse/partner, who will also have their own ISA allowance of £15,240; or
· children or grandchildren (under 18), Junior ISAs have an allowance of £4,080 for tax year 2016/17
The ISA allowance runs for each tax year, but any unused allowance will be lost on 5th April at the end of each tax year. Over recent years, we have seen the Government encouraging more savings by raising ISA allowances and for 2017/18 there is a large increase in the total ISA allowance to £20,000.
How can I invest into an ISA?
You have the following ISA options:
· Cash ISA – for anyone over 16
· Stocks and Shares ISA – for anyone over 18
· Innovative Finance ISA
· Help to Buy ISA – aimed to support first time buyers and available to anyone aged 16 and over
· Lifetime ISA – being lauched in April 2017 and aimed at first time aged between 18 and 40
· Junior ISA – available to children under 18
You can spread your ISA allowance across these different options or choose to invest your ISA allowance using just one of the options. Cash ISAs no longer need to be held separately to Stocks and Shares ISAs and the total allowance applies across all options. Some different ISA options may have some specific limits or features:
For Cash ISAs, the rates of return depend on the interest rates available, so in the current climate of low interest rates, the returns are likely to be low – see our news story about cash investments in low interest rate environment,
Stocks and Shares ISAs can be invested in a wide range of funds to suit your own attitude to risk and financial goals.
Innovative Finance ISAs were introduced on 6th April 2016 for the growing Peer-to-Peer lending market. We don’t advise on Innovative Finance ISAs as Peer-to-Peer lending is a higher risk investment and is not a product area we choose to advise on as they are not covered by the Financial Services Compensation Scheme.
Help to Buy ISAs were introduced in Autumn 2015 and they allow you to save up to £200 a month, and you can also make an initial investment of up to £1,000. If you use the funds towards the first time purchase of a UK property then the Government will boost your savings by 25%.
Liftetime ISAs (LISA) - (launch April 2017) will allow you to contribute up to £4,000 each year, providing a bonus if the funds are used to buy your first home or are taken after your 60th birthday.
Junior ISAs can invest in either Cash or Stocks and Shares. Parents manage the account but the money is owned by the child.
Let Origen help you
Once you recognise the tax benefits of saving into an ISA, you face many choices – but our Consultants can help you to choose the right ISA option for your financial goals and your circumstances.
Call us on 0344 209 3925
Calls are charged at your phone company's basic rate. All calls are recorded for business purposes.
This article is for information only, based on our understanding of legislation and HM Revenue & Customs practice as at January 2017 and is not to be taken as Financial Advice. CA1204 Exp 04/04/18
[ Date Posted: 19/01/2017 10:24:40 ]