ISA choices: quick dry or ultra tough?

Man caught in a maze representing the confusion with ISA

Savings

Alistair Hardie

23rd December 2013 at 10:00am

We’re faced with making choices and decisions every day of our lives. Some we don’t have to think about; others are big decisions that require more of our time. This is true when it involves our money and how much to save or spend.

If you’re a DIY enthusiast you know what I’m talking about! I’ve had to learn a lot about varnish recently. I didn’t appreciate just how much choice there is. I turned to a well-known brand and selected ultra tough. With a young family, the doors and skirtings need protection. And I don’t want to varnish for years to come!

Are you one of the 24m who’ve made an ISA choice?

24m people in the UK have made the decision to save in ISAs and collectively they hold about £443bn. If you are one of them and have been in from the start, you’ll be familiar with the ‘family tree’ of tax-efficient savings.  There’s PEPs, TESSAs, mini and maxi ISAs and the new generation of Cash ISAs and Stocks and Shares ISAs. And there’s the Junior ISA for the children.

What if you’re not in with the ISA crowd yet?

If you haven’t started an ISA, don’t be put off by the jargon and complexity. Do what I did when I was faced with the varnish challenge and speak to friends and colleagues and do a bit of googling. Here’s 8 ISA facts to get you started ;

  1. ISAs are a way to save without having to pay income tax or capital gains tax.
  2. There are 2 types of ISAs; Cash ISAs and Stocks and Shares ISAs.
  3. Cash ISAs are similar to a regular savings account with the advantage of sheltering your interest from tax.
  4. Stocks and Shares ISAs allow you to put your money into investments, rather than cash.
  5. In each tax year (6 April to 5 April) you have to stick to the ISA limits. The 2013/14 limit is £11,520. You could put all of this in a Stocks and Shares ISA or split it with a Cash ISA where the limit is £5,760.
  6. If you can invest more, you could put up to £3,720 in a Junior ISA for a child.
  7. You can transfer existing Stocks and Shares ISAs into a new Stocks and Shares ISA and this doesn’t count towards your ISA limit.
  8. If you have a Cash ISA, you can transfer it to a Stocks and Shares ISA.

There’s a lot of choice of ISAs out there all competing for your attention. Make sure you prepare well and don’t gloss over the detail. It’s your money after all.

The information in this blog is not financial advice.  A Stocks and Shares ISA and a Junior ISA are investments.  Their value can go up or down and may be worth less than you paid in. Laws and tax rules can change in the future.   

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