When you’re in the great position of being able to save and invest money, it can be difficult to know how to go about it. Of course, we all want to get the best return on our cash and that’s why it’s important to make the right choice. This is especially the case when it comes to Individual Savings Accounts (ISA) where you can be penalised for early withdrawals. Here are some key things to note about choosing the right ISA for you to avoid these pitfalls and get the best return on your savings and investments and truly find out if an ISA still worth having?
What Is an ISA?
An ISA is just like a standard savings account but has a couple of added bonuses. Namely, any cash that you deposit into an ISA is tax-exempt and so are any earnings accrued from the account.
It’s a great way to increase you tax-free income allowance if you choose the right account. However, it should be noted that the maximum amount of cash you’re able to deposit into an ISA each financial year is £20,000. Also, any withdrawn funds can’t be reinvested without losing out on the tax-free benefit.
Benefits of an ISA
If you’re on the fence about opening an ISA then it’s worth thinking about the following benefits of doing so:
- Cash deposited into an ISA and any subsequent earnings from the account are tax exempt. Note, the only potential issue here is that contributions are capped at £20,000.
- If you opt for an investment ISA, you have control over the risk levels. If you’re risk-averse, then you can invest conservatively while those with a higher risk tolerance can be more aggressive with their investments.
- Different types of ISA accounts allow you the freedom to choose whether to save or invest.
- An ISA doesn’t affect your free tax allowance and simply works as an extension of it.
- You can retrieve your funds whenever you like. However, you will need to wait for a set period that you agree to upon opening the account.
Things to Consider
Although opening an ISA can be incredibly beneficial there is still the problem of knowing which account will best suit your needs. That’s why it’s a good idea to let professionals do the hard work for you.
An ISA comparison guide such as the one provided by LearnBonds will walk you through the top 10 ISAs available based on both reputation and highest earning potential. This removes a lot of the stress around looking for the best saving or investment option and allows you to make informed decisions.
Ultimately, opening an ISA is a great option if you have the cash available to do so. If you’re well informed about the ins and outs of the ISA you’ve chosen then you know you’ll be getting the most out of the benefits that such accounts can provide. Look at the comparison guide linked above to fully understand how ISAs aren’t all created equally and how you can start accumulating tax exempt returns today.