Guide to ISAs

Building your investment is one of the most fundamental financial strategies.

Whether it is to get on the housing ladder, help the children through college, for a rainy day or for a more comfortable retirement, your investments form an essential part of your Financial Plan.

There are a number of simple, tax-efficient options that are available to everyone, including investing in an ISA.

With an ISA, the taxman cannot help himself to your money. All the interest, income and capital gains generated in your ISA remain yours. It means that an ISA is a simple and tax-efficient way to potentially grow your wealth.

They are often described as a tax wrapper that keeps your money safe from tax. An ISA is a simple way to invest over time, where your capital and all of the interest, income and capital gains generated, can potentially grow your wealth tax efficiently until you want to take your money out.

An ISA can form the basis of most people’s savings portfolio – because it ensures you pay no personal tax on your savings or the interest they earn.

However, they are made a little less simple because of the choice they offer. There are many different types of ISA, including Lifetime ISAs, Junior ISAs, and Innovative Finance ISAs, although the two best known types are cash ISAs and stocks and shares ISAs.

You can decide whether to invest in one particular ISA, or across a few – but whatever you decide, the amount you invest overall will be limited to your annual ISA allowance. This is the limit that the government places on ISA investment each year, which is currently £20,000 for the 2020/21 tax year.

Since they were introduced in 1999, a whole family of ISAs has grown up, providing a solution to all types of investment needs. You can have more than one, but all are subject to the £20,000 overall allowance.

Cash ISA

• Invest up to £20,000 in 20/21 tax year
• Up to £85,000 protected (by UK regulated providers)
• You can transfer to stocks and Shares ISA
• Open to anyone over 16 used to build your financial goals tax efficiently

Stocks and Shares ISA

• Invest up to £20,000 in 20/21 tax year
• Money invested to suit your approach to risk
• Open to anyone over 18
• Used to build your financial goals tax efficiently

Junior ISA

• Invest up to £9,000 in 20/21 tax year
• Available to anyone under 18
• Used to build your children’s future tax efficiently
• Easily converted to regular ISA when child turns 18

Lifetime ISA

• Between 18-39
• Can be used to fund retirement
• Save up to £4,000 each tax year
• Government bonus 25% on savings
• Exit penalty of 25% if funds are withdrawn before 60, unless used to buy first home up to £450,000

Innovative Finance ISA

• Invest up to £20,000 in 20/21 tax year
• Higher risk
• Open to anyone over 18
• Tax advantages of ISAs combined with peer-to-peer lending

When you have decided on the type of ISA that is right for your needs you need to look at the way you want to invest in it.

Getting expert help to find the kind of ISA that is right for you needs, and the most cost-effective provider is essential, as there are hundreds to choose from. Fortunately, at Continuum, we know the ISA market, and can help you find the ISA and the provider that offers the best match for your plans.

Call us today for the help you need.

The information contained in this guide is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action. The value of investments can fall as well as rise and you may get back less than you invested. Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers. Equity investments do not afford the same capital security as deposit accounts. The Financial Conduct Authority does not regulate deposit accounts.