There are three types of ISAs available for your savings and investments. You can open a Cash ISA, a Stocks & Shares ISA and an Innovative Finance ISA (launched on 6 April 2016). Each of these ISAs provide a tax-efficient way to save whether you decide to invest a lump sum or top up your ISA with a regular monthly payment. Below, we explain the pros and cons of the two most popular ISAs; Cash ISAs and Stocks & Shares ISAs.
Cash ISAs
Cash can form a good basis for a portfolio – unlike stock market investments, cash savings can offer immediate access and the capital is secure. Cash ISAs operate just like a normal savings account except all the interest is tax free. The interest rate offered in a Cash ISA will vary based on which provider you choose. Therefore, it’s essential to shop around for the best deal using the best buy tables which can be found in the press or online. Watch out for headline-grabbing introductory rates or temporary bonuses though, as when these disappear you could be left with an unattractive rate.
Stocks & Shares ISAs
A Stocks & Shares ISA is a tax-efficient investment account that allows you to hold a variety of investments together and save tax. In a Stocks & Shares ISA, you can hold funds, shares, investment trusts, corporate bonds and more and protect them from further tax. Unlike Cash ISAs, the value of your holdings in a Stocks & Shares ISA can go down as well as up so you could lose money. However, investing in a Stocks & Shares ISA offers the possibility of higher returns.
Choosing between a Cash ISA and a Stocks & Shares ISA
Cash ISAs are often more suitable for short-term investing, typically less than 3 years, whereas a stocks and shares ISA is usually regarded as more suitable for longer term investing, typically for more than 3 years. Over the longer term, they can deliver higher returns but they are higher risk.
You can invest £15,240 into an ISA this tax year. This then rises to £20,000 for the next tax year. If you want to know more contact us on 0808 168 5866 or email info@harteywm.co.uk
