Many people either don’t know what an ISA account is or they believe that it’s a complex process when it comes to saving. Here is your quick guide to ISA accounts and how they can benefit you.

ISA accounts can help your savings grow.

What is an ISA account?

In a nutshell, an ISA account is a savings or investment account that is tax-free. You can save up to £20,000 per year (2020/21) in one type of ISA or a combination of ISA accounts. You earn interest on your savings, or in the case of a stocks and shares ISA, you earn profits.

Lifetime ISA Account

A Lifetime ISA allows you to save up to £4,000 a year as a lump sum or pay as you go.

The great perk about Lifetime ISA’s is that the state contributes 25% on top of your savings, and this is before interest and growth. This bonus will be contributed to your account until your 50, and will be paid monthly. The maximum bonus that can be earned overall is £33,000.

For example, if you save £2000, the state will add a £500 bonus. If you save the maximum of £4000 the state will add a £1000 bonus, the maximum contribution that can be earned.

Cash ISA Account

Cash ISA accounts are basically saving accounts where you pay no tax on the interest you earn. There are a variety of types from instant access to regular savers, and the interest you earn doesn’t count towards your personal savings allowance.

Stocks and Shares ISA Account

A Stocks and Shares ISA account allows you to invest funds into company stocks and shares. They are often managed by online brokers or platforms, fund management groups or fund supermarket.

The price of stocks and shares fluctuate.

The benefits of this ISA are:

* You pay no capital gains tax on profits made from share price increases.

* You pay no tax on interest earned on bonds.

* You pay no tax on dividend income.

There are usually fees associated with opening and holding a Stocks and Shares ISA, and some companies may charge for making changes to investments, or withdrawing funds.

It’s also important to remember that with any form of investing, capital is at risk. If you’re new to the investing world, be sure to do your research before opening a Stocks and Shares ISA account.

Junior ISA Account

A Junior ISA Account is a tax free account that encourages families to save towards their child’s future. You are able to save up to £9000 per year (2020/21) and the money will be available on your child’s 18th birthday when the money becomes there’s in a standard ISA account.

Savings can be split between two types of Junior ISA accounts:

Cash Junior ISA account – you simply deposit cash into a savings account that will always be tax-free. Your money is secure and you gain interest on any savings you have.

Stocks and Shares Junior ISA account – your returns depend on the performance of the stocks and shares you have invested in.

Junior ISA accounts can help you save towards your child’s future.

Having an ISA account is a good way to capitalise on your savings for the long-term. You can save towards your retirement or give family members a head start in life. Whatever your reason may be, take advantage of the tax-free benefits to get more value for your hard earned money.

T K Williams-Nelson

Published by T K Williams Nelson

I'm Tannika. Author & Writer. Business Owner. Spoken Word Poet. As featured in The Kilburn & Brent Times, The Voice Newspaper, Brent Magazine, BBC and more. This is my space. I share my work, my experiences and things I find interesting. Shop my streetwear and crochet brands at my online boutique, Unique Boutique London, and my books: Tales of the Hood Underclass 7 Time is Money Available on my author website, Amazon, Barnes & Noble and all other online book retailers. For enquiries: timeismoneyinquiries@gmail.com

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