Millions of people choose to save money in ISAs as it offers tax-free interest and a good way to save. In this article, we look at some of the key attributes of ISAs as well as how you can double your ISA allowance.
One of the most common types of ISA is the cash ISA. Currently, this type of account allows you to save up to £5340 every year, and the limit tends to rise each year, which is positive for people who are keen to save regularly. You can make as many deposits as you like into your cash ISA, as long as the amount you put in doesn’t exceed your yearly limit. You can typically also get access to your money whenever you need it, which is another positive feature that appeals to many people. The fact that any interest you earn is tax-free is another benefit.
However, what do you do if you want to save more than you can with a cash ISA? Some people like to save a greater amount of money each year, and so they might like to consider opening a stocks and shares ISA. Upgrading from a cash ISA to a shares ISA effectively doubles your ISA allowance automatically. The current limit for a share ISA is £10680 per year. You can choose to either save the entire amount in the form of shares, or save half of it as cash – it’s up to you.
This means that if you want to save as much as you can, an investment ISA can be a very good option. It also gives you the option of keeping the security of your cash ISA while still adding an investment element to it and providing you with more
saving options. You just need to remember that there is a risk attached to investment ISAs because their performance is dependent on the performance of market-listed companies.
Essentially, this means that if the stock market is doing well, your ISA should be as well, and there is the potential to get very good dividends on your investment.
However, you need to be aware that if the market goes through a rocky patch, your ISA is likely to do the same – this is why it can be a good idea to think of a stocks and shares ISA as a long-term investment as it is more likely to do well over the course of several years.
In order to make sure you get the best stocks and shares ISA for you, take a look at the different options open to you. For instance, some people like the idea of a bond ISA, as this has the potential for good returns but has less risk attached to it. Other people like the idea of climate change ISAs, which invest in green companies. You also need to decide whether you want to invest your total allowance or save half of it as cash. However, if you want to double your ISA allowance and save more on a regular basis, with the potential for great returns, a shares ISA is definitely worth it.