What are the benefits of ISAs?
ISAs (Individual Savings Account) have helped millions of people across the UK to grow their wealth. There are many reasons why an ISA may be right for you, and we’ve covered some of the common benefits often associated with them.
To discover more, jump over to InvestingReviews.co.uk and find out which ISA is right for you.
You don’t pay tax on returns
Here are the key facts:
You don’t need to pay tax on interest earned
Money that is in an ISA often accrues interest. Any interest that you earn is not subject to tax, and therefore you keep 100% of the interest that you earn from the money within an ISA.
You don’t need to pay capital gains tax
If your money is in a Stocks and Shares ISA, you do not pay capital gains tax on anything that is earned. Outside of a Stocks and Shares ISA, capital gains tax is levied on anything over £12,300.
You don’t need to pay tax on dividends
Some ISAs pay a return in the form of dividends, like companies sometimes do with their shareholders. If you receive a payment via dividends from your Stocks and Shares ISA, you do not need to pay tax on the money earned. Outside of a Stocks and Shares ISA, anything above £2,000 is taxed.
ISAs offer a range of flexibility for different reasons
ISAs can be used to help you save money for a range of different reasons. For example, you could put your money to work in the stock market through a stocks & shares ISA. The Lifetime ISA (which replaced the Help to Buy ISA in 2019) is designed to help home buyers, and includes a government top-up of 25% on annual savings of up to £4,000.
There are lots of different ISAs depending on your situation to help you manage your money.
ISAs are easy to manage
ISAs allow you to manage your money whatever your circumstances and goals are. Unlike a pension, there are usually no restrictions on when you can withdraw your money. In most cases there are no penalties for taking your money out either.
You don’t need a large amount to get started
You don’t need a large sum of money to get started. Some ISAs can be opened with just £1, allowing you to get the account up and running.
Of course, the more money that’s in the ISA, the bigger the potential return.
ISAs could help you beat inflation
The rising cost of living has been making plenty of headlines lately. In recent months inflation has climbed to an eye-watering 5.5%. A Stocks and Shares ISA could be one solution to helping you insulate yourself.
Though there are risks attached to a Stocks and Shares ISA, the average return tends to outpace inflation.
An ISA can help you start your investment journey
Investing is a popular way of diversifying income streams and building wealth. However, many people are unsure where to start, and feel anxious to begin with.
An ISA is a great way to dip your toe into investing. It can help build your confidence and give you somewhere to start learning the basics.
Investing in an ISA can come with a lot of positives, however, it’s important to know that your money is at risk and you may end with less money than you invested. With that said, most ISAs are offered by leading institutions who employ experienced money managers to help you choose your investments prudently.