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Individual Savings Accounts

Are you looking for a way to save your money free from the tax man? Can you invest up to £3,000.00? Do you want to be able to have easy access to your investments? If you answer yes to any of the above, then an Individual Savings Account (ISA) could be just what you are looking for.

Individual Savings accounts or “ISA’s” as they are more commonly known as, are available in two different forms; the “Mini ISA” and the “Maxi ISA”.

The “Mini ISA” has two different parts to it; the “Mini Cash ISA” is an account where you can invest a maximum amount of £3,000.00 cash in any one tax year up to 5 th April and a “Mini Stock and Shares ISA” which is where you can invest a maximum of £4,000.00 worth of stocks and shares in any one tax year up to 5 th April. The other form is a “Maxi ISA” which can be made up of a maximum investment of £7,000.00 worth of stocks and shares in one company in any one tax year. All ISA accounts are classified as untaxed savings accounts. Therefore, you don’t have to pay tax on any interest earned.

There are limits imposed on how many ISA’s you can invest in, in one tax year. You can’t invest in the same type of “Mini ISA” at the same time during the same tax year. Therefore, you can’t hold two “Mini Cash ISA’s” in the same tax year. If you had the opportunity to invest the maximum of £7,000.00 in any one tax year and you wanted to save into a Mini ISA plan, the Mini ISA investment would have to be made up of part “Mini Cash ISA” and part “Mini Stocks and Shares ISA”.

Cash ISA’s can be opened by anyone aged 16 years or above. All other ISA’s can be applied for by anyone aged 18 years or above. Applicants have to be resident in the United Kingdom for tax reasons. You can open an ISA account with as little as £1.00

Most banks and financial companies now offer banking services through the internet. It’s very common now to be able to apply for accounts using the relevant banking websites.

The information required to open an ISA are your personal details, National Insurance number, and the amount for investment and payment details.

You can pay a lump sum amount into your chosen ISA or you can make monthly payments totalling the maximum investment allowed per ISA. Some companies impose a minimum amount of monthly payment allowed to be credited to your ISA account.

Once you have reached your maximum investment amount, you will not be allowed to credit any further funds to your ISA until the next tax year has commenced.

You can withdraw funds from you ISA at any time; some companies request that you do this in writing or via telephone request. Some lenders only allow you to withdraw a minimum amount of money from you ISA account.

Other lenders, allow you to transfer money into alternative bank accounts using the relevant telephone banking systems.

Interest on savings are quoted in the form of AER (Annual Earnings Rate), some companies offer Cash ISA’s that have variable rates and therefore, the rates can vary with the amounts of cash invested and the rates can be subject to change at any time. Alternatively, there are fixed rate Cash ISA’s available, however if a fixed rate cash ISA is taken out there may be clauses associated with withdrawals and investments.

With a Stocks and Shares ISA, you can either choose which companies stocks and shares that your savings will buy, using a self select ISA or you can use your chosen ISA Company to invest in specific stocks and shares on your behalf. This is commonly known as a fund manager selecting into a collection of shares known as “Unit Trusts” or “Investment Funds”.

Points to consider with “Cash ISA’s” are that they can give you instant access to your savings and the main advantage is that interest earned on your savings is tax free. There is usually no fixed term for investment.

With “Stocks and Shares ISA’s” the value of your savings can go up and down depending on how well your chosen stocks perform.