An Individual Savings account, which can also be called an ISA, is a particular type of savings account that allows the holder to get ready for his future life. People who decide to open an ISA usually want to save money to ensure a more economically stable future while investing in it. The reason why this kind of account is so popular among people of all ages is that it allows the holder to save or invest his funds without paying any tax on it. The money you put in an Individual Savings Account will always be protected from tax, and this could be very convenient. However, it is crucial to keep in mind that, just like any other kind of investment, your money might grow over time but it could also go down as well. For this reason, when withdrawing your savings there is always going to be a chance to find less money than you put in. Anyway, nowadays new investors have plenty of choices regarding the many types of ISAs available and other products such as bonds. So which should an individual investor choose? Let’s look at the many types of Individual Savings Accounts available in the UK.
How many kinds of Individual Savings accounts are there?
Nowadays, all residents in the United Kingdom can choose between Stock and Shares ISAs, Cash ISAs, Lifetime ISAs, Innovative Finance ISAs and Junior ISAs. A Stock and Shares ISA is an investment and savings account specifically designed to invest money in stocks, shares, bonds and so much more. Like any other kind of ISA, by opening a Stock and Shares account you’ll be saving and investing your money as well in a tax-efficient way. A Cash ISA is a savings account that can be opened by any UK resident over 16 to save money while earning tax-free interest. This kind of account could be a good choice for new investors who want to start saving money without it being subject to market fluctuations. Another popular kind of Individual Savings Account is the Lifetime ISA, which can be opened to help the holder to make all life-related purchases. This type of ISA gets usually chosen by people between 18 and 40 years old who want to save for a new house or for retirement. The maximum amount which can be deposited in a Lifetime ISA is currently up to £4,000 per year. On the contrary, Innovative Finance ISA is a particular kind of investment account that lets the holder lend money with the goal to get it back with interest. Just like any other type of Individual Savings Account, the money you put in an Innovative Finance ISA will always be protected from tax but just like Stocks and shares ISA your capital is at risk. Lastly, you can open a Junior ISA, which is a particular kind of Individual Savings Account that has been specifically designed for underage children. It can be opened by a parent or a legal guardian to save for their children, who will be able to access the money when they turn 18.
Have ISAs restrictions?
As previously mentioned, ISAs come in many different types. Whichever kind of savings account you decide to open, it is important to remember that every ISA comes with a restriction on the amount of money that can be deposited in a year. This value is called “annual ISA allowance” and it currently amounts to £20,000 per year for Cash ISA, Stocks and Shares ISA and Innovative Finance ISA. On the contrary, the holder of a Junior Individual Savings Account (which is an ISA for underage people) will be able to deposit a maximum amount of £9000 per year; while the holder of a Lifetime ISA can deposit up to £4,000.