ISAs Explained
What is it?
ISA stands for Individual Savings Account when dealing with investment management. Individual Savings Accounts (ISAs) provide a way of holding savings and certain investments so that there's no tax to pay on income or gains. The government offers these tax benefits as an incentive for us all to save. They have been around for many years now and are they are one of the most popular products within the financial advice world. It is often the first leap into investing for those who want financial planning advice and don’t know how to invest money. Those who don’t know how to invest money can start small with and ISA that will grow in time. Then as their financial planning advice expands, they can grow further with their investment manageemnt.
The different types of ISA
There are two types of ISA:
A Cash ISA
If you have your money in a building society, you can ensure some of it is classed as an ISA and this amount will not be subject to tax. The maximum amount at the moment is £5,100.
Example: If you have £10,000 in your building society account, £5,100 can be classed as an ISA and therefore not subject to tax, but the remaining £4,900 will stay as it is and still be subjected to tax.
A stocks and shares ISA
These must once again be obtained through a fund house, when buying a unit trust. This basically means that a certain amount of money that you invest will not be subject to tax. The maximum amount at the moment is £10,200.
Example: If you wish to invest £20,000 through a fund house or trading platform, you can ensure £10,200 of this is classed as an ISA and not taxed by the government, but the remaining £9,800 will be subjected to tax.
If you want to take out an sticks and shares ISA, it is often an idea to speak to a financial advisers UK first. They will have the expertise to help you quantify your risk and help you pick funds. We seriously recommend you see financial advisors UK rather than using an execution only broker.
Cash ISA to Investment ISA
When transferring cash ISA into an investment fund, your initial investment fee will be significantly reduced. When investing a non-ISA, there will be a 3-6% charge to invest with a fund house. If you wish to invest your cash ISA, this charge is much lower (it varies from fund house to fund house.)
ISA Rules
You can buy an ISA provided you are:
Tax resident in the UK.
Aged 16 or over (for a cash ISA).
Aged 18 or over (for a stocks & shares ISA).
If you move abroad you can keep your existing ISA(s) but cannot contribute any more money.
Since an ISA is merely a label for a portion of money that will not be taxed, the process for investing your ISA will be very similar as the process for investing your money, or pension or any other asset management for that matter. However, as you can see investing within an ISA can be extremely beneficial, and with the right asset management it can build up over time and be a great savings platform to compliment your pension when you retire. Part of our package involves our Fidelity FundsNetwork online trading platform, which allows you to trade securely and easily online. You can also take out an ISA by simply following a few easy steps, and with guidance from one of our independent financial advisor. We do give you the functionality to “do it yourself” but we do always advice you speak to one of our financial advisors first.