ISAs are among the most popular products for saving and investing in the UK. An Individual Savings Account (ISA) is a tax-free investment product explicitly designed for UK taxpayers who want to save or invest their money. ISAs can be used to save towards retirement, buy a property, pay off debt and more with no extra tax due on any returns made.
With so many types of ISAs available, it can take time to know where to start. This comprehensive guide will look at the various types of ISAs available in the UK and what each has to offer so you can decide which type best suits your needs. To learn more about how to sign up, you can visit Saxo Capital Markets.
Cash ISAs
A cash ISA is the most straightforward type of Individual Savings Account and is the most commonly used ISA. With a cash ISA, you can save up to £20,000 yearly or invest some of your money in stocks and shares. The interest you receive on your savings is tax-free, so any returns made are all yours to keep.
Cash ISAs also have the bonus of being flexible – you can take money out and put it back in if needed. Furthermore, cash ISAs are protected by the Financial Services Compensation Scheme, so your money is safe in case your bank or building society goes out of business.
Stocks and shares ISAs
Stocks and shares ISAs are similar to cash ISAs, but they offer more of an investment opportunity because they allow you to invest some or all of your money into stocks, shares and/or funds. They also provide more potential for growth than a cash ISA because investments carry more risk.
You can invest up to £20,000 each year in a stock and shares ISA, and any returns you make are all yours to keep as the investments are tax-free. Like cash ISAs, stocks and shares ISAs are also protected by the Financial Services Compensation Scheme, so your money is safe in an emergency.
Help to buy ISAs
Help to buy ISAs (HTBISAs) were introduced by the government in 2015, and they’re designed specifically for people looking to buy their first home. With an HTBISA, you can save up to £12,000, which will be matched with a bonus of up to £3,000 from the government. This bonus can be used towards buying your first home, and any interest you receive on your savings is tax-free.
It’s important to note that HTBISAs are only available for people who have not owned a property before, so if you’re looking to buy your second or subsequent home, then this ISA won’t be suitable.
Innovative finance ISAs
Innovative finance ISAs (IFISAs) were introduced in 2016, allowing you to invest some or all of your money into peer-to-peer lending platforms, which can offer higher potential returns than cash or stocks and shares ISAs.
These investments carry more risk than the other types of ISAs, so it’s essential to do your research before investing in them. You can invest up to £20,000 each year into an IFISA, and any returns you make are all yours to keep as the investments are tax-free.
Lifetime ISAs
Lifetime ISAs (LISAs) were introduced in 2017, and they’re designed for people who want to save towards their first home or retirement. With a LISA, you can save up to £4,000 per year and receive a bonus of up to £1,000 from the government. This money can be used towards buying your first home or saving for retirement, and any interest you receive on your savings is tax-free.
It’s important to note that there are restrictions on when and how you can take your money out, so it’s essential to research and understand the rules before investing.
To that end
ISAs are a great way to save or invest your money as they offer tax-free returns on all savings and investments. With so many different types now available in the UK, it can take time to decide which is correct.
This comprehensive guide has outlined the various types of ISAs available in the UK and what each has to offer to make an informed decision when choosing an ISA for yourself. It’s important to always do your research before investing and remember that investments come with some level of risk. Always talk to a financial advisor if unsure which ISA suits you.
