Individual Savings Accounts, or ISAs as we’ve come to know them, celebrate their twenty first birthday this year. Yes, everyone’s favourite tax-free savings account has come of age. True to life, the once straightforward ISA has grown into a much more complex and multi-faceted product, with several different options now available to savers. Acumen explores the various types of ISAs on the market today and explains how each of them works.
How do ISAs work?
ISAs, or Individual Savings Accounts to give them their full title, have been helping British savers to squirrel away funds since 1999. The main benefit of ISAs is that they provide a tax-free way to save, up to an annual limit. In the current tax year, adults can contribute a maximum of £20,000 across all their ISAs without incurring taxes on those savings. More on the various different types of ISA products later.
ISAs can’t be held jointly, they can only be arranged on an individual basis, and can’t be held in a trust. They can be inherited by a surviving spouse or civil partner though. It’s also worth noting that ISA investors need to be UK residents or non-resident Crown employees working overseas and subject to UK tax on their earnings, in order to qualify. Children aged 16 or 17 can also invest in a full ISA, but only in the cash component.
The main types of ISAs
From what began as one relatively simple savings scheme, there are now a number of ISA products available with a much greater degree of complexity thrown into the mix. To give you an idea of what’s available, here’s a quick overview of the different types of ISAs available to UK savers currently.
Basic ISA: The original ISA is still going strong with the option of a stocks and shares or cash component. Both are now interchangeable, which means you can transfer from one to the other with ease.
Junior ISA (JISA): The JISA is available to children under 18 years of age who do not have a Child Trust Fund (CTF) account. As with the basic adult ISA, cash and stocks and shares options are available. Maximum contribution of £9,000.
Innovative Finance ISA: Innovative Finance ISAs are relatively new products and are limited to investments in cash, as well as two specialist, higher risk lending areas.
Lifetime ISAs (LISA): The LISA, enables adults aged below 40 to save up to £4,000 a year with a government bonus of up to £1,000. They’re intended to help investors to save towards a first house or retirement.
How to get the most out of your ISAs
Investment is a specialist area and should only be conducted by authorised advisers. Every investor’s ISA portfolio is different, which is why taking professional advice from an independent financial adviser is the safest and surest route to savings success. Acumen offers fully independent investment advice to help you achieve your financial goals.
Our fully qualified and impartial advisers are on hand to offer advice about which types of ISAs are best suited to your circumstances. We can also review your existing ISA holdings to ensure they still meet your needs, and provide strategies to minimise your tax liabilities beyond your ISA portfolio. We’re on your side and ready to help you maximise your savings and returns.
For more information about our investment advice services, or to speak to one of our financial advisers, please contact Acumen today by calling 0151 520 4353 or email us at email@example.com.