Is it worth getting an ISA

ISA stands for Individual Savings Account. ISAs are a tax-efficient way of saving money. You can save or invest up to a set amount each year( your ISAS allowance) and you don’t pay any tax on the income or capital gains for an investment ISA or the interest if using a cash ISA

  1. Each tax year you will have a new ISA allowance. This is the amount that you can pay into your ISA(s) in that tax year. The current ISA allowance is £20,000. Each tax year you are able to save your money into one of each kind of ISA. Subject to not exceeding the overall £20,000 allowance.
  2. Any money your ISA makes from either gains in the stock market, or from income, is tax-free.
  3. You can either split your allowance across different types of ISA E.G £10,000 in a stocks and shares ISA and £10,000 in a cash ISA, or choose to invest all of your ISA allowance into one type depending on your aversion to risk.

You cannot carry over your ISA allowance. If you don’t use your whole allowance in a tax year, it will be lost. The UK tax year runs from 6th April to the 5th April the following year so plan ahead.

The benefit of saving into an ISA is that you can earn interest tax-free, but it’s not the only way. Thanks to the introduction of the Personal Savings Allowance in the UK, most basic rate taxpayers will not have to pay tax on the interest they earn until it exceeds £1,000. Higher rate taxpayers have a £500 allowance while additional rate taxpayers have none at all. With interest rates so low at the moment you would need a fairly large savings pot to make it worth your while.

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