ISAs, also called Individual Savings Accounts, are a popular way to save money in the UK due to the flexibility they offer, as well as due to the tax advantages.
Here we explain the 6 ISAs available…
💷 Cash ISAs
Similar to a regular savings account, but with the added benefit that the interest earned is tax-free. Cash ISAs offer flexibility, providing easy access to your savings, often without penalties for withdrawals. They are generally low-risk, as your capital is protected, ideal for short to medium-term savings goals.
💷 Stocks and Shares ISAs
This ISA allows you to invest in a range of assets, including stocks, bonds, and funds, with any gains being tax-free. There is no capital gains tax or further income tax on dividends. With a wide range of options, it can cater to different risk appetites and goals. It is suitable for those willing to accept some risk, aiming to invest over the medium to long term.
💷 Lifetime ISAs
Designed to help individuals save for their first home or retirement. You can save up to £4,000 per year, and the government adds a 25% bonus on your contributions. This bonus provides an extra £1,000 per year if you maximise your contributions. This ISA serves a dual purpose, either for purchasing a first home or for retirement, with the added benefit of a government bonus.
💷 Innovative Finance ISAs
This ISA allows you to lend your money through peer-to-peer lending platforms or to invest in crowdfunding projects, with returns being tax-free. There is no tax on interest received from loans. This type of ISA offers higher potential returns compared to Cash ISAs, but it also carries higher risk. It involves direct lending, allowing investments in loans or crowdfunding projects.
💷 Junior ISAs
This ISA is a tax-free savings account for children, where parents or guardians can save on behalf of their child for their future. The tax benefits include no tax on interest, dividends, or capital gains. Funds are locked until the child turns 18, promoting long-term savings. The annual contribution limit is £9,000 for the 2023/24 tax year.
💷 NEW British ISA
The British ISA is a new ISA which was announced during the Spring Budget 2024 by chancellor, Jeremy Hunt. It is a new way to invest in UK companies without paying tax on the interest or returns. It includes a £5,000 allowance, which will be in addition to the existing allowance of £20,000. More details will be shared in time.
Whether you are saving for a rainy day, investing for the long term, buying your first home, lending through innovative finance, or securing your child's future, there is an ISA to suit your needs. Assessing your goals and risk tolerance can help you choose.
If we can help begin or review your investments, please get in touch.
For ISA’s 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 manager . Tax treatment varies according to individual circumstances and is subject to change.
You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.
By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.
We do not provide advice for Innovative Finance ISA’s.
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Willow Tree Financial Services are a Financial Adviser based in Polegate, East Sussex, UK. We specialise in Financial Planning, Mortgages, Investments & Pension Planning, Protection & Insurance Wills, Trusts & Estate Planning.
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