Are you thinking of opening an account to keep your savings aside? An ISA might be right for you. An Individual Savings Account is a particular type of account that allows the holders to save and invest their money according to their preferences. One feature that makes these accounts so popular is the ability to deposit, withdraw and invest money in a tax-efficient way. This means that the money in your account will always be protected by UK taxes.
Today, all British citizens over 16 years old are eligible to open this particular kind of account. There’s even a special ISA intended for parents who want to put money aside for their underage children. Whichever type you decide to choose, you should know that ISAs come with a restriction on the maximum sum that can be deposited in a year.
This value is called Annual ISA Allowance and it currently amounts to £20,000 per year. If you want to discover more about the matter, you can also check this link https://www.moneyfarm.com/uk/isa/.
You can choose between many ISAs
ISAs come in many different types intended to meet the needs of as many holders as possible.
The most common type is called Stocks and Shares ISA, which is an individual savings account that lets you invest your money in shares, bonds, real estate, and more, without ever paying any tax on it. Just like any other kind of investment, investing in a stock and share ISA could be risky. In fact, you should always keep in mind that your every move will be subject to the market’s constant swings and you could end up getting less than expected.
Cash ISAs are another kind of individual savings’ account. They can be opened by all British citizens over 16 to save money while earning tax-free interest.
On the other hand, Lifetime ISAs have been designed for people between 18 and 40 who want to put money aside for their future. By opening this type of account, you will be able to deposit up to £4,000 per year and to enjoy a 25% bonus on behalf of the Government.
There’s also a special account called Innovative Finance ISA designed to let the holder lend money with the goal to earn tax-free interest payments. However, also in this case the risk is very high and there’s no guarantee to earn the promised rate of interest.
As mentioned above, the Government has designed a special ISA for underage children called Junior ISA. This account can be opened by a parent to put money aside for their children. The Junior ISA can also be opened by a legal guardian and other family members and friends can contribute to the children’s future as well. In this case, the annual ISA allowance amounts to £9,000 per year.
Differences between ISAs and GIAs
Many new investors may struggle to figure out whether to open an ISA or a GIA. These are two really different accounts and you should choose the one that best suits your needs. As mentioned above, an ISA is an Individual Savings Account designed to let you save and invest funds in a tax-efficient way.
On the other hand, a GIA is a General Investment Account which has been exclusively intended for investments. As a matter of fact, it can be opened by any British citizen over the age of 18 and it lets the holder invest in a great diversity of economic areas. Unlike stocks and shares ISAs, GIAs come with no restriction on the amount of money that you can deposit in a year.
Also, an ISA is a tax-free account, while a GIA requires you to pay contributions depending on your tax situation. The best way to figure out which is the best account for your situation is to calmly evaluate all the different features of GIAs and ISAs based on your financial situation and needs. For instance, if your goal is to save or invest money for your future, ISAs ma offer a great solution for this purpose.
On the other hand, if you’re planning to embark on a new investment journey both ISAs and GIAs might represent a good choice. Moreover, if you don’t want to have a limit about how much to invest, a GIA may be the alternative. Anyway, whichever account you choose, if you’re planning to open an investment account to give your money the chance to grow over time you should always keep in mind that all kinds of investments are risky: in fact, the market volatility makes the outcome of any economic move unpredictable.