ISAs are currently the most common type of savings account available in the United Kingdom. They can also be called Individual Savings Accounts, and they are some particular types of savings account which let you to save or invest your capital depending on your preferences. Unlike other savings accounts, an ISA will let you invest in a wide range of fields and always in a tax efficient way: as a matter of fact, you’ll be able to choose the best investment area for your situation and invest your money without paying any tax on it. You can also click here if you want to discover more about the ISA allowance and how to get the most out of your investment.
How do ISAs work?
As mentioned above, all investments performed through an ISA will always be protected from UK taxes. That’s one of the reasons why these particular kinds of investments accounts are so popular among people of all ages. However, even though investments might seem a really good and easy way to make your money grow, you should always keep in mind that they are risky and constantly subject to the market’s swings. This means that when investing you’re giving your capital the chance to grow, but you’re also risking to get back less than what you invested. Either way, British residents who decide to open an ISA are spoiled for choice when it comes to the different types of accounts currently available.
How many types of ISAs are there?
The most popular kind of Individual Savings Account currently available in the UK is the Stock and Shares ISA, an account designed to let the holder invest in a wide variety of assets, such as stocks, shares, bonds, commodities and more without ever paying any tax on it. The Cash ISA is really popular as well, for it has been designed to be a tax efficient regular savings account. If you want to save or invest your money for life related matters, a Lifetime ISA might be the best choice for you. On the other hand, an Innovative Finance ISA will let you lend capital with the goal to get it back with interest. There’s also a special account specifically designed for parents or legal guardians to save money for their underage children called Junior ISA.
Are ISAs and GIAs the same?
A GIA, that’s to say General Investment Account is another option UK citizens can take into consideration, but it works differently than an ISA. ISAs are Individual Savings Account designed to resemble a regular savings account while it provides tax benefits to the holder and it gives the possibility both to save and to invest money. On the other hand, GIAs have been specifically designed to invest in a great diversity of areas outside of tax wrappers. By opening a GIA you’ll be able to withdraw your money at any time: that’s one of the reasons why so many people decide to opt for this account instead of opening a regular retirement fund. Also, ISAs come with a restriction on the amount of money you can deposit every year. On the contrary, GIAs will let you deposit as much as you want. Another important difference between these two kinds of account is that an ISA works in a tax efficient way, whereas if you open a GIA you will have to pay contributions depending on your tax situation. Which kind of account should you open then? The choice is completely up to you and it depends on your needs and preferences.
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