Individual Savings Accounts

You will find that individual savings accounts or ISA’s for short are going to be a tax favoured savings and investment account. In other words you are going to find that many of the ISA’s offer tax free options to help you increase your overall savings over a period of time. These types of accounts where created in 1999 to replace things like PEPs and TESSA’s. You will find that ISA’s are used to save cash, invest in stocks and shares. In this article you will find out the different types of ISA’s as well as what you can do with them.

With ISA’s you are able to save or invest your money. You can save cash in the account and save on the interest. In some of the accounts you will find the interest is tax free. You will also find that you can invest in shares or funds with an ISA where the capital growth is going to be tax free and there is not going to be a tax to pay on the dividends you receive.

The Types of ISA’s are going to be varied. You have a Maxi ISA that is where you input cash into the account. The investment is based on life insurance or stocks and shares. You will find that the Maxi Isa must be with the same ISA manager.

The Mini ISA’s are going to be stocks and shares, life insurance policies or other medium to long term investments or cash. You will find that you can put money into one maxi ISA or two mini ISA’s in one tax year.

The amount of savings and investments are going to be limited. In other words you can save or invest up to £7,000 in one tax year. In other words with a maxi ISA you can place the 7,000 pounds into an account including stocks and shares and cash. This means you can split the money into cash and stocks and shares or just invest the entire sum in one of the two options.

With the mini ISA’s you have the same option. You can put money into one type of mini account or two. Your cash limit is going to be 3,000 pounds and your stocks and shares will be a limit of 4,000 pounds for a total of 7,000 pounds.

You will find that you can save tax on the ISA accounts. This means that you would have paid tax on the basic rate, which is usually 20 percent. So the first amount you save is about 20% on tax. If you are lumped into a higher tax rate you can usually save about 40% on tax with these accounts. You will also find that if you paid the starting rate of 10 percent you will then save 10 percent on tax with the ISA accounts. You will also find that you are saving income with the dividends. You are not going to pay taxes on any dividends you earn from the stocks and shares. This means the profit is going to be yours from that dividend.

Back To January 2008 Financial News
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