ISAs
What is an Individual Savings Account (ISA)?
An Individual Savings Account, or more popularly known as a ISA, is a savings account with a tax break. The UK government put rules in place that means that anyone that saves money in an ISA pays no capital gains tax on the gains they make on their capital, and no income tax on the income they draw from their savings with an ISA.
What is a cash mini ISA?
A cash mini ISA has a £3000 limit, hence the mini. And it's invested purely in cash or deposit-based accounts, not stocks and shares.
What is a maxi ISA?
A maxi ISA is the older brother of a mini ISA. You can put more money in - £4,000 rather than £3,000. More often than not, a maxi ISA is invested in stocks and shares, or the stock market, rather than cash.
What kind of ISA should I have?
"What kind of ISA should I have?" is the million dollar question, and it's really down to you. If you don't want to see your money go down, opt for a cash-based ISA. If you're happy for a little bit more of a gamble, and to hold on there for longer to give your returns the time to go up, then go for stocks and shares-based ISA. If you're at all unsure, seek professional advice.
What are the advantages of ISAs?
The advantages of ISAs are that your savings and the growth on them are sheltered from income tax and capital gains tax, both now and into the future.
What are the disadvantages of ISAs?
The disadvantages of ISAs are the limits. They're a great place for tax-free savings, but we can only put so much in: £3,000 for a Mini cash ISA and £4,000 for a Maxi ISA. Remember also, if you invest in an ISA with stocks and shares, a big disadvantage is that the value of your investment could go down.
