With the arrival of a new tax year, I’m wanting to touch on saving money. Particularly in the form of investments. It seems like there is no better place to start than with ISA’s, and so this post was born; my six top tips for getting started with ISA’s…
1. What is an ISA?
Firstly, let’s start with the basics. What is an ISA? ISA is an abbreviation which stands for; Individual Savings Account. If you’re just getting started with ISA’s then it’s important to note that you have a choice of three different ISA’s:
Cash ISA: You don’t have to pay tax on any interest you receive from your savings.
Stocks and Shares ISA: Invest your ISA allowance in shares or funds and You don’t have to pay tax on any income or capital gains from your investment.
Innovative Finance ISA: Peer to peer lending with agreed interest rates where you don’t have to pay tax on any income or capital gains from your investment.
2. Who Can Open An ISA?
To open an ISA you must be over 16 (over 18 for a stocks and shares or innovative finance ISA) and a UK resident.
You can’t hold an ISA on behalf of somebody else, however if you have a child who is under the age of 18 you can instead opt for a Junior ISA.
3. How Can You Open An ISA?
Once you’ve chosen the type of ISA you would like and the company you would like to invest with, it’s all about opening that account.
Doing so couldn’t be easier, you often have the choice of three options although it will vary depending on who you choose to invest with. They are: Online, Phone or in Store.
4. When Should You Invest in an ISA?
Whether you can invest £100 a month or £1,000 a month it doesn’t matter. The important thing is the sooner the better. I say that thanks to the beauty that is compound interest. Every finance bloggers best friend. Compound interest. This allows you to generate earnings on your earnings. A phenomenon once dubbed “the eighth wonder of the world” by none less than Albert Einstein.
However, don’t worry. I’m not going to ask you to work out the long-term benefits of your ISA yourself. Instead this handy calculator will do all the hard work for you.
5. How Much Should You Invest In An ISA?
From the start of the new tax year (2017 / 2018) the ISA allowance is rising from £15,400 a year to £20,000.
If your first thought is “£20,000, Ha! I wish” then think again. I have dedicated resources helping you to save money on everything from your holidays to date nights, right through to your weekly shop.
6. Can You Transfer An ISA?
If you’re not getting the most out of your ISA then you may want to transfer it to a different one. Doing so is technical, however many companies now offer dedicated ISA switching services.
One thing to note is that you should NEVER withdraw your cash from your ISA. By doing so you’ll loose your tax saving benefits.
Important Things To Note About Your ISA
The value of investments can go down as well as up so you may not get back the amount invested.
The value of tax savings and eligibility to invest in an ISA or Junior ISA depend on personal circumstances. All tax rules may change in future.
This is a sponsored post. As always, the words and opinions are my own and aren’t intended to be a personal recommendation in respect of a particular investment. Getting started with ISA’s can be complex and so as with all financial products and investments, I recommend seeking independent financial advice.