What to Consider Before Investing In An ISA
Investing even small amounts of money can go a long way at the end of the year. With the new tax-year underway, some savers may be tempted to place some extra money in an ISA account, but it is important to know what exactly they are choosing to invest in before committing any cash.
This short guide provides things to consider before investing in an ISA. It outlines why you should choose this type of product and how it works. Read on for further information before opening your own account.
What Is An ISA?
An ISA, or Individual Savings Account, is a savings vehicle that allows you to save without having to pay tax on the growth. Rather than paying tax on the money you make, any growth is yours to keep.
Why Invest In An ISA?
Perhaps one of the most common reason why people choose to put money in an ISA is that ISAs offer tax-free growth on your investments. Since tax does not apply to any interest or capital gains within an ISA, savers can benefit from having a tax-free account and keep all their returns.
Another reason people choose to invest in an ISA is due to the flexibility it provides. Withdrawals and transfers between different types of ISAs are easy compared with other financial products; this means you can move money around as needed, or withdraw cash whenever you want often without penalty charges.
You don't need a lot to start with
You can start investing in an ISA with as little as £100 per month, or a lump sum of £500 if you want. If you start small, you’ll feel the benefits build over time. For high net worth investors, the benefits can build up faster. You should also note the eligibility to invest in an ISA depends on your own circumstances and that tax rules may change in the future.
Long term growth
Money that is deposited into an Investment ISA can be invested into a selection of products (things like shares, bonds, commodities, and property) that are traded on the stock markets. This can give your money the potential to grow beyond the returns you might get in a Cash ISA, but it also means there’s a risk you could get back less than you put in.
How Does An ISA Work?
An ISA is an investment product that allows savers to place their money into a range of different accounts with flexibility. There are several types of ISAs, with the most common 2 being, Cash ISAs and Stocks & Shares ISAs. Here are some further details on each type of account:
Cash ISAs are simple savings accounts that pay interest, but don't provide access to capital growth. On withdrawal, funds are returned in full with no additional charges beyond potential penalties incurred by withdrawing within the previous year.
Stocks & Shares ISAs are more complicated, but they offer investors the chance to make money through both capital growth and interest. They provide access to investments in a range of funds, stocks, and shares, where savers can hope for capital appreciation along with an investment income.
Investing With Schofield
Before investing in an ISA, there is some research that needs to be carried out into your options. At Schofield, we take the time to understand your priorities and recommend the changes required to achieve the right balance between saving and spending.
Financial planning is a continual process. At Schofield, we know that circumstances and priorities change over time, so financial plans have to adapt as well. That’s why, we regularly meet our clients to check that we understand their current concerns and issues as well as any longer-term hopes and dreams. Throughout the year, we take note of any market fluctuations, new legislation or tax changes to ensure we always give you the best and most up to date advice.
It is never too late to open an ISA. Whether you’re at the very beginning of your career or are nearing retirement, now is the best time to start. Get in touch and let us help you make the most of your money so you can live the life you want.
Come and talk to the experts at Schofield. We can have a friendly chat about your future hopes and dreams and help you set up a financial plan that’s right for you.
The value of any investment with Schofield Money will be directly linked to the value of the funds chosen. These may fall as well as rise, you may get back less than the amount invested. The bases and levels of taxation, and the reliefs from taxation can change at any time. They are usually dependent on individual circumstances.