Benefits of Using an ISA for Your Savings

January 6, 2015 Updated: April 23, 2016

An ISA or Individual Savings Account is provided by the government and is a tax-free allowance, so is well worth taking advantage of. It may seem a little confusing at first as there are two possible types of ISA’s to consider; the cash ISA or the stocks and shares ISA.  You can either invest money into the stocks and shares or the cash ISA, but not both of them in the same year. An ISA is an interesting way to save as it offers protection that you don’t get with other savings accounts. Saving on the tax means that you get more out of your money. If you are unsure as to whether an ISA is right for you, these benefits may encourage you to take advantage of this personal way of saving.

Tax Free ISA Allowance

An ISA is a tax free way of investing, so you get the most out of your ISA allowance. Whether you are investing your money in a cash ISA or stocks and shares, you won’t have to pay capital gains tax on your ISA investments. This is regardless of how much you pay into your ISA or withdraw. The ISA is also income tax free. If you are a basic rate taxpayer, you will save around 20% and higher rate tax payers will save 40%. It is best to start using your ISA at the start of April as this will maximise your potential returns on an investment of up to £5,670. You can learn more about Nutmeg’s stocks and shares ISAs by visiting the link.

Easy Access

You can take out the money from your ISA whenever you wish, you don’t have to apply to do this or wait any length on time. This instant access can really make an ISA an appealing option when it comes to savings accounts. It is also a very simple process to open an ISA and it doesn’t take any effort to run it.

Nothing to Declare

When doing your tax returns, you don’t need to declare any information about the income tax or capital gains tax which you may have gained from your ISA. This makes it easier to fill in your tax return and you won’t need to worry about this adding to the complicated matters of completing a tax returns form.

Customise

You can customise the ISA to suit your individual circumstances. For instance, younger savers may wish to use the growth ISA investments, while older savers may be more interested in the income producing ISA investments. ISA’s offer a good range of flexibility, depending on what you are looking for from your investment.

Increasing Returns

At the moment, the ISA allowance is £5,670 and as this has frequently increased, it is likely that this will be the case going forward. This means that you are tax free up to this amount, so you get increasing returns, the longer you stick with your savings.