UK taxpayers can pay up to £20,000 every financial year into ISA accounts. This includes all the different variety of ISAs, such as cash ISAs and stocks and shares ISAs. It’s important to be aware, however, that you can only put your money into one of each kind of ISA every year. For example, you can only invest once in a stocks and shares ISA in each financial year. If you want to invest in more than one ISA then you will need to space them apart by at least a year.
Your ISA allowance resets at the end of every tax year. However, you cannot roll over any unused allowance; you will get £20,000 every year irrespective of how much you used the previous tax year. Savers do have the option of making their Investments on an ad hoc basis, adding to the ISA throughout the year. Alternatively, you can deposit all of the money you want to invest in a stocks and shares ISA in one go. Whether you can then freely draw on the money depends on the specific ISA you choose.
If the value of your investment in a stocks and shares ISA goes up, then the gains will not be subject to the usual capital gains tax. In fact, most of the income that you make through an ISA is tax-free.
Gains Aren’t Taxed
The main thing that makes ISAs attractive as investment accounts is that the majority of the profits you make will be tax-free. It should be remembered that these regulations are likely to change over time. Although they may become more generous to investors, it is also possible that they will go in the other direction and you might end up paying more tax. Make sure that you check the current arrangements for tax-free allowances for ISAs before you invest.
Anyone Can Do It
There is a widespread perception that taking advantage of ISAs and other savings and investment instruments is prohibitively difficult or expensive for the average person. Of course, your ability to invest will always be limited by money to some extent. However, that doesn’t mean that you need to have significant savings in order to put some of them towards a savings account like an ISA.
For example, you can open an ISA account with Willis Owen with as little as £25 to contribute. Willis Owen’s ISA is also an example of a ‘flexible ISA’. This means that you can withdraw money from your ISA without penalty, provided you return it within the same tax year. As with any ISA, there are various fees and other conditions that you need to know about.
If you think that an ISA account is the right option for you then you should begin reading up on them immediately. If you have access to an accountant or financial advisor, ask them to help you identify the right stocks and shares ISA for your investment goals.
Generate A Tax-Free Monthly Income
With an ISA account, you are able to completely remove emotion from the investing process. An ISA can generate money for you passively without you having to lift a finger. If you are looking for a relatively safe way of investing, without having to go through the process of learning all about how to trade stocks and shares on an exchange, and ISA provides you with a viable investment alternative.
You will need to choose an ISA plan that offers this feature, as not all plans will come with a monthly income. As always, it is important to check the fine print and ensure that you fully understand the terms of any ISA before you agree to it. But if you are able to find the right account for your circumstances, you can sit back and enjoy a monthly income automatically.
Diversify Your Investment Portfolio
When it comes to managing your finances, putting all of your eggs in one basket can be disastrous. If your investment portfolio is built upon a single asset or commodity, it is little more than a house of cards waiting to fall. Nothing is certain in the world of investing and even the strongest assets can undergo an unprecedented collapse in value.
An ISA is not guaranteed to make you money in and of itself. However, by using an ISA to invest in a new asset or market, you can diversify your existing investment portfolio. While no investment is guaranteed to increase in value, some investments are safer than others. An ISA is a great way of putting your money into an investment that is likely to make a return, even if it is a small one.
As long as you are prepared for the money in your ISA to sit there for a couple of years, an ISA is a useful solution for anyone who wants their savings to grow passively.
