5 great reasons you should be investing in an ISA
Get one over the taxman with tax-free savings in 2017
It’s that time of year again – ISA season. You know…the one between the clocks going forward and the sun actually coming out, when the UK’s banks and building societies do their utmost to help you get one over the taxman.
We’ve rounded up the main reasons you should be getting involved in 2017.
It gives you tax free savings!
ISA, standing for Individual Savings Account, lets you earn interest on your savings, tax free. At the moment if you put your money into a savings account with your bank, you will pay tax on any interest earned. For example, if you earn £100 interest on your savings, you will only receive £80, with the other £20 being retained as tax. However, when you put your savings into a cash ISA you can save up to £15,240 without having to pay any tax on the interest earned.
A common misconception is that the money saved in an ISA cannot be touched until a future date. Although there are types of ISAs that work this way (and can be preferable to those of us who are too easily tempted to dip into our savings), there’s also an option to open an ‘instant-access’ ISA which allows you to make withdrawals whenever you want. Just like a normal savings account.
Switching will get you the best interest rate.
If you’ve already got an ISA you can always switch to get a better interest rate. Unfortunately, loyalty doesn’t tend to pay, if you stick with the same provider year after year, you’re more likely to be on a lower rate than a new customer. As with car insurance, energy providers and savings accounts, switching regularly and taking advantage of new customer offers will ensure you’re on the best rate possible.
Switching your ISA couldn’t be easier. Find a new ISA provider, with a better rate, and they will organise the entire switch for you. They will even inform your previous ISA provider about the switch.
Children can have their own ISAs
It’s not just adults who can take advantage of the tax-free savings, children (under 16 years old) can have their own junior ISAs as well. They can save up to £4,080 tax free, every year. Kids between 16-18 years old can additionally open a cash ISA meaning they could save up to £19,320 (in cash) a year tax-free.
There are many different ways to take advantage of an ISA
The standard savings cash ISA is just one way you can take advantage of your tax-free earnings.
Stocks and Shares ISAs do exactly what they say on the tin. You can invest your savings and not pay capital gains tax on any gains made within your ISA. Also, there’s no need to choose between this and a normal cash ISA as you can split your tax free limit between the two.
Help to Buy ISAs have been set up for first-time buyers saving for a mortgage deposit. You can earn up to 4% interest tax-free and the government will top up your savings by a further 25% up to a maximum of £3000. Help to Buy ISAs are a type of cash ISA, meaning you can’t usually hold both in the same tax year, though some providers allow you to split your allowance between the two.
As of the 6 April 2016 the Innovative Finance ISA also allows you to lend money through a peer-to-peer platform and you don’t pay tax on the interest earned. It’s worth bearing in mind that these types of ISAs are more risky than putting money into a cash ISA. By lending money there’s always a chance the borrower won’t repay. As with any ‘investing’ the more risk you take, the potential greater rewards.
You can earn cashback as well!
Quidco have teamed up with a host of top ISA providers to bring you these amazing cashback deals. Check them out below.
All cashback rates correct at the time of publishing. Please refer to respective retailer pages on Quidco for cashback Terms & Conditions.