The Individual Savings Account (ISA) – Saving your money the tax efficient way

Cash ISAs are simply savings accounts where the interest isn’t taxed, if you are a non tax payer then this may not be of any significance to you, however, if you are a taxpayer then clearly it would be to your advantage to utilise this wrapper for any funds you intend to hold in savings accounts.

Just like normal savings accounts there’s a variety of cash ISAs available, such as instant access, fixed rate, and accounts with base rate guarantees.

Bank accounts are a good idea for emergencies and short term savings. However, if you already have that covered and are looking for a potentially greater return on your money, you should consider investing in a Stocks and shares ISA

There are many good reasons to invest in an ISA

ISA’s are tax efficient wrappers which in the case of a Stocks and Shares ISA means that you don’t pay either income tax on the interest you earn or capital gains tax on any capital growth.

Each individual can invest up to £11,280 in the tax year 2012/2013, of which up to a maximum of £5640 can be in a Cash ISA and any remaining balance can be in the Stocks and Shares ISA.

It provides a flexible tax efficient option whether saving for a specific purpose or perhaps for an income in retirement.

If you don’t use your ISA allowance in the tax year – you lose it.

Of course, stocks and shares are not as secure as bank accounts and by seeking the potential for capital growth you are increasing your chances of losing money. Stocks and shares ISA’s are long term investments and ideally, should be kept for a minimum of 5 years to give them the best chance of increasing in value. Therefore keeping an ISA for only a short period of time will increase the likely hood of losing money.

Shares in individual companies may be placed inside what’s called a self-select ISA, which are usually managed by stockbrokers.

However a more common use of the shares allowance is for collective investment vehicles like unit or investment trusts. These are pooled investments where a fund manager picks a selection of shares based on geographic or sector criteria and the value of the investment depends on the collective performance of the shares picked.

It is possible to switch provider for cash or shares ISAs; in fact to make sure you continually get a top rate this is recommended, particularly for cash ISAs.

Within the full stocks and shares ISA spectrum there is available an ISA to suit most investment risk profiles from the cautious low risk to the adventurous one for the high risk takers.

With the advent of the Fund Platforms it is now possible for individuals to get access to a vast range of funds with any asset allocation ranging from the highly specialist funds investing in selected areas of a market such as energy companies, or gold to one with a wide range by investments in global companies. The level of risk attached to these highly specialist funds is significantly higher.

With the Multimanager concept investments are made through a group of investment managers, each a specialist in their own field, who are brought together into one portfolio. The Multi-Manager is responsible for: Fund design, Manager research and selection, Ongoing monitoring, Manager and fund changes, and Pricing negotiations

What ever you requirement we can recommend an ISA to suit you. For an interview or application form please phone 01244 401000 or email.

ISA Guide 16/17