ISA Account

By: EconomyWatch   Date: 23 September 2009

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An ISA account is a tax saving investment in which the interest earned and the returns are not liable for taxes. In order to qualify for an ISA (Individual Savings Account), you should be a resident of the UK and 18 years of age or more.

 

Investment Limit for ISA Savings Account

You can invest up to £7,200 in any tax year in various combinations in an ISA account. You can invest up to £3,600 in cash and the rest in shares and stocks. You can also choose to have the entire allowance in shares and stocks. However, it is not mandatory to use the entire allowance and you can invest less than £7,200 in a tax year.

Types of ISA Savings Accounts

You can invest in various types of ISA accounts:

Cash ISA:It works like a regular savings account. The difference is that you are not liable for taxes. You can save up to£3,600 in any tax year. You do not have the option to top up your cash account once you have reached the limit or after a withdrawal. However, you can shift your cash ISA account from one to another to enjoy better interest rates. A transfer will not affect the allowance. However, not all providers agree to a transfer. You can open a cash ISA account from building societies, banks, post offices or major supermarket chains.

Stocks and Shares ISA:It lets you to use a part or all your allowances to invest in stocks and shares. It works like a share trading account. Apart from buying individual shares, you can also opt for funds or collective investments in your stocks ad shares ISA. Funds offer a broader exposure to a set of investments, such as overseas equities and corporate bonds, and you can be free from the hassles of picking the right stock. To open a stocks and shares ISA, you need to open a trading account with a stock broker. Most of the stock brokers and fund providers will let you establish a monthly contribution scheme, so that you can spread the risk of your investments over the investment period.

It is better to use your ISA account at the start of each tax year in order to utilize the complete tax benefits. Delays in making use of your account will affect the potential capital growth.


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