Sailing the Seven ISAs – Without Becoming Lost

Posted by siteadmin on Friday 1st of July 2016.

There are currently seven types of ISA available to savers, but what are the pros and cons of each?

Basic ISA
An old classic, which comes with a tax-free wrapper, so you don’t pay tax on your income – or your returns. We think everyone should have one, and switching providers helps you remain on the best rates available. If you have a stocks and shares ISA, you can leave the money invested for 5+ years.

Junior ISA
Available to everyone who is aged under 18. You can save up to £4,080 per year, tax free, for each child. Money can remain in the account until they turn 18, when the fund becomes a basic ISA. However, the child gains control of the money on their 16th birthday.

Children born between 3 January 2011 and before September 2002 who have a Child Trust Fund can switch their investments to a Junior ISA.

Inheritance ISA
These are for widows/widowers and bereaved civil partners who lost their loved one after 3 December 2014. It provides an extra ISA allowance on top of the standard £15,240.

Help to Buy ISA
This is a monthly savings deal for first-time home buyers who are looking at properties up to £250,000 outside of London, or £450,000 within. It provides a tax-free savings allowance of up to £12,000 for a housing deposit, and if you save the maximum amount you receive a £3,000 bonus. You can kick-start the account with £1,000 and then add up to £200 a month.

You can withdraw cash for something other than a deposit, but you’ll lose the 25% bonus.

Lifetime ISA
This savings account will become available in April 2017 to people aged between 18 and 39. For every £4,000 saved a year, the government will add an additional 25%. However, anything you save in this ISA will use up some of your overall £20,000 ISA allowance for 2017/18.

You can withdraw money to buy a house worth up to £450,000, or leave it in the ISA until you are aged 60. Any withdrawals taken earlier, for anything other than a deposit on a home, will be taxed at 5%.

Flexible ISA
This is a newly available ISA in which you can invest your whole £15,240 tax-free allowance, and withdraw and deposit money within the same tax year, without losing any of your tax-free entitlement. It’s ideal for savers who need to retain access to their cash.

Innovative Finance ISA
This is another new ISA that lets you put your savings with peer-to-peer lenders or invest through crowdfunding websites. It cuts out the bank, so you can lend directly to a borrower for a better return – but this introduces a higher level of risk.

With this ISA, your money is not covered by the Financial Services Compensation Scheme if the borrower defaults or the provider collapses.

If you’re thinking about using your ISA allowance, please contact us for advice.

The value of an investment and the income it produces can go down as well as up, and you may not get back as much as you put in.

Estate planning is not regulated by the Financial Conduct Authority.

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