Did you know that if you invest in a Lifetime ISA, the UK government would top it up by 25 percent? And if you aren’t eligible for a Lifetime ISA, you still have some other ISAs to take advantage of.
ISA Investments, otherwise known as an individual savings account, can allow you to save your money and earn interest from your savings without the hassle of paying any income tax. It is a tax-free savings account where the capital gains from an ISA aren’t affected by tax the way a typical savings account would be.
How does this work?
So, if you are in the United Kingdom, then you have an opportunity to save or invest your money up to a certain amount without paying any tax on the returns. You can do this every tax year by paying into your ISA investments. For the year 2021-22, the tax-free allowance for a UK adult is £20,000. The limit is subject to change from year to year, but you can continue to add your yearly limits to your ISAs every year.
Types of ISAs
Well, there are mainly two kinds of ISAs. One is a Cash ISA, and the other is a stocks and shares ISA. In a Cash ISA, you can deposit and withdraw funds as many times as you like. You can also opt for a Fixed Term ISA and deposit your money for a fixed amount of time.
The Stocks and Shares ISA, on the other hand, hold your ISA investments in the form of equities, i.e. stocks and shares, bonds, investment funds, and investment trusts.
How to open an ISA?
With the benefits of technology, it is easy to open an ISA online. But if you want to opt for other methods, you can always create your ISA account in an appropriate branch, through post, or over the telephone. In this case, you will initially have to deposit some money, ranging anywhere from £1 to £1000.
All you will need is a bunch of personal information such as your name, address, national insurance number, and signature. Moreover, you will have to read an ISA declaration that will tell you the workings of this thing.
After opening the ISA account, you will get a passbook, certificate or an online statement for viewing. Based on your mode of use, you can either manage your ISAs through online banking or carry your passbook or certificates to withdraw your money.
Are ISAs worthwhile?
Cash ISAs come with several benefits like different account options, real-time access to funds, etc. They are a good idea if you are comfortable with the usual interest rates. But if you want to grow your wealth in addition to tax savings, then Stocks and Shares ISA is a good option for you. With that, you can store away your money for several years and get a better value on this long-term investment opportunity. As you can start investing with a small fund, it’s practically a no-brainer.