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What Should You Know About ISAs?

  • Posted 2nd November 2015

What Should You Know About ISAs?

If you are wondering where to put your savings in, then Individual Savings Accounts (ISAs) are just what you need because ISAs is one of the most tax-efficient ways to save and invest for your future. However, before you open ISAs, there are lists of things you should be aware of. What is ISA allowance? Each tax year, you get a new ISA allowance that sets a maximum amount you can save. For 2015-2016, the ISA allowance for this tax year is £15,240. What types of ISAs are available? There are two types of ISAs called cash ISAs and stocks and shares ISAs. Cash ISAs are savings accounts where you do not have to pay any tax on the earned interest. With such accounts, you will have easy access to your money whenever you need it. In addition, the rate on such accounts is either fixed or variable. In stocks and shares ISAs, you will have the options of investing in funds, bonds and shares available in the market. They are usually for longer periods and are considered as a more risky form of investment than cash ISAs. On the other hand, you do not have to pay any tax on the profits earned from share price increment and on the interest earned on bonds. Who can open an ISA? If you are 16 and over, you can open a cash ISA. However, if you are 18 and over, you are eligible to open a stocks and shares ISA. You must also be a UK resident to open such account and cannot open it on behalf of someone else. Can I open an ISA for my children? A junior ISA is available for the children, which allows you to save on behalf of your child. It allows you to save up to £4080 a year and will not be accessed to your child until he/she turns 18. Can I switch provider after setting up? You can switch provider for cash to stocks & shares ISAs or vice versa. For this, you need to speak to your new provider and fill out a transfer form. Then, your new provider will manage the transfer process and move the money over for you. How to open an ISA? You can get an Individual Savings Account (ISA) from a range of banks, building societies, credit unions, and stock brokers. Can I more than one ISA in a tax year? You are only allowed to put money to one Cash ISA and one Stocks and Shares ISA in a tax year. How can I withdraw money? You can have full access to your money in your Individual Savings Account (ISA) at any time, without losing any tax benefits on your savings. However, after the money is withdrawn, you cannot invest it in the same tax year. If you have more queries about ISAs, make sure to contact your provider today and get your queries answered.

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