Home Budgeting Finance ISAs Explained

ISAs Explained

We would all like ways to maximize our money with a minimal amount of effort, but surprisingly few of us know of one that already exists: the ISA. Although you may be familiar with the term, the chances are that you’re not sure of exactly what it means or the benefits that it encompasses.

It’s time to change that. With numerous boons for those who take advantage of this financial instrument, it pays to know how you can profit from it, and how you can start investing. Read on to find out…

What is an ISA?

As you might already have guessed, the term ISA is an abbreviation, in this case for an individual savings account. It is, as the name implies, a savings instrument, and one that can be highly beneficial to a lot of people.

Essentially, it allows you to deposit a certain amount, without having to pay tax on any money that you make through interest. As it currently stands, the amount you can put into an ISA for the tax year 2016/2017 is £15,240, although this is set to rise to £20,000 for 2017-2018.

There are two main types of ISA: a cash ISA and a stocks and shares ISA. The former acts as a highly popular savings account; the latter as a tax-free wrapper for investments. You can pay into one of each, provided that the total value of both does not exceed the amount stated above.

Who Can Open an ISA?

Part of the beauty of ISAs lies in their flexibility, and taxpayers from every walk of life can benefit from them. The only bar at all is age, but provided that you’re over 16 you are entitled to open a cash ISA, and once you reach 18, you may also open a stocks and shares account. For those younger than this, a junior ISA alternative is available, which can be useful if you’re planning on starting a savings fund for your child or another minor.

How Much Can You Put into an ISA?

As stated above, every taxpayer can invest up to £15,240 for the 2016/2017 tax year. This can be divided between a cash ISA and a stocks and shares ISA in any way that you like, or else invested fully in one or the other.

Come to the start of the next tax year, a new allowance is received, and the amount it is set at may vary from the year previously. Over time, this means that savvy investors can earn a significant sum thanks to their tax-efficient savings.

If you want to do more with your money, why not consider investing in an ISA today?


Photo via flickr


Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to content