Individual Savings Accounts (ISAs) are varied - they can range from cash that you want to save in the bank, to speculative stock market shares. Whatever your investment type, an ISA may be useful in order to ensure that it exists in a tax-efficient environment.
*The value of your investment can go down as well as up and you may get back less than the amount invested
Individual Savings Accounts (ISAs): Overview – GOV.UK (www.gov.uk)
ISA Limits
An ISA allowance can be split across a Stocks & Shares ISA and a Cash ISA or invested all in either one. Children are subject to their own ISA allowance.
Types of ISA
There are different types of ISA account, all with their own unique features:
Cash ISA
Cash ISAs are similar to savings accounts, but the interest is tax-free, meaning that any interest you earn, you keep. Cash ISAs differ depending on your needs: some offer instant access to your money, and others feature fixed rates for those individuals looking to save a lump sum.
Stocks and Shares ISA
A Stocks & Shares ISA allows you to invest in funds, bonds, and shares in individual companies. You do not have to pay Capital Gains Tax on profits made from share price increases. There is no tax on interest earned on bonds, nor on dividend income. There is a fee for the management of your accounts.
Junior ISA
Junior ISAs are designed to build up the savings of an under-18, tax-free. The account can be opened by a parent or guardian on behalf of the child, and both family and friends can contribute. Junior ISAs can operate as either Cash ISAs or Stocks & Shares ISAs. The child cannot withdraw funds from the account until they reach the age of 18.
Help to Buy ISA
A Help to Buy ISA is specifically used to help first-time buyers amass a deposit for a property by providing them with a 25% boost on top of their savings. They are Cash ISAs with a lower allowance of £200 a month, plus a one-off £1,200 lump sum. You cannot now apply for a Help to Buy ISA but those already open may continue with contributions.
Lifetime ISA
For those looking to open an ISA between the ages of 18-39, the Lifetime ISA offers a 25% boost on savings. However, it does limit your activity – you cannot take out any money from this ISA before the age of 60, unless it is for your first home, or you will lose the 25% boost. You can hold this ISA alongside another Cash ISA, or Stocks & Shares ISA, but it will take up part of your £20,000 overall ISA allowance. A maximum of £4,000 a year can be invested.
ISA Transfers
Transferring ISAs – whether from a Stocks & Shares ISA to a Cash ISA, or between providers – is technical, and should not be carried out without professional guidance. It is not advised that you withdraw all the money from your ISA yourself – if you do, you will lose all associated tax benefits.
Your financial planner will be able to help you transfer your ISA, but they must follow the transfer rules:
- Current year’s Cash ISA: This can be moved in its entirety to another Cash ISA, or into a Stocks & Shares ISA. It cannot be split between multiple providers.
- Current year’s Stocks & Shares ISA: This can be moved in its entirety to another Stocks & Shares ISA, or into a Cash ISA. It cannot be split between multiple providers, or more than one Stocks & Shares ISA.
- Past years’ Cash ISA: These can be moved in their entirety to another Cash ISA or a Stocks & Shares ISA. Or, they can be split between more than one Cash ISA or Stocks & Shares ISA.
- Past years’ Stocks & Shares ISA: These can be moved in their entirety to another Stocks & Shares ISA or a Cash ISA. Or, they can be split between more than one Stocks & Shares ISA or Cash ISA.
We can help by:
- Collecting the facts necessary to establish a picture of your current financial situation
- Establishing your ISA-based objectives
- Identifying the most tax-efficient wrapper for you and constructing a suitable investment/savings plan
- Presenting you with written financial reports
- Providing you with ongoing financial support and guidance
- Evaluating the performance of your ISA(s) annually for optimal gain/preservation
*The Financial Conduct Authority does not regulate taxation advice
Where a client’s circumstances require specialist advice, and the local office does not hold the necessary permission from the Financial Conduct Authority, we can draw on the wider specialist expertise available within Perspective Financial Group Ltd nationally. Many of our financial planners hold advanced qualifications in specialist areas of advice, as well as having decades of experience in solving almost all financial planning related issues.
