Even a savvy saver can find the jargon around ISAs and tax-efficient savings daunting. If you’re thinking of moving your money but don’t understand what ISAs are or how they work, follow our handy guide to help you take advantage of tax-free savings and our best ISA deals from our range.
ISA simply stands for ‘Individual Savings Account.’ There are two are two types of ISA – Cash ISAs and investment ISAs.
A cash ISA is like a normal savings account but offers the following key benefits:
An investment ISA is a tax efficient wrapper for your investments which have certain qualifying criteria. (I.e. You must be at least 18 for an investment ISA and resident and ordinarily resident in the UK for tax purposes.)
If you deposit funds in an investment ISA (also known as a stocks and shares ISA), your money will be invested in the stock market.
Investment ISAs are free from capital gains tax and income tax but the tax credit on dividend income received is not reclaimable. Investment ISAs have the potential to outperform cash savings but you need to be aware that, as these ISAs operate within the stock market, their value at any given time can fluctuate as returns depend on the performance of the underlying investments – so you can lose money as well as make money.
Before moving your money, you may want to consult your financial adviser to identify the best ISA deals and investment plan to suit your needs.
Remember, eligibility for ISAs depends on your individual circumstances, and the rules around them – such as their tax treatment – could change in the future.
All UK nationals have an annual ISA allowance of £10,200.
It’s important to think about your attitude to risk before investing in an investment ISA because the returns are not guaranteed, and you may end up with less money than you originally put in because the value of investments can go down as well as up.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
* Barclays Research ‘Consumers set to lose out on cash ISA allowances.’ (25 Mar 2010)
Barclays is a major global financial services provider engaged in retail banking (bank accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides business bank accounts, online loans, home insurance, life insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.
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