What sets ISAs apart from other savings and investment accounts is that they come with significant tax benefits.
Individual Savings Accounts (ISAs)
What is an ISA? Why choose a stocks and shares (Investment) ISA? Individual Savings Accounts (ISAs) were introduced in April 1999 to replace old-style tax free savings.
Commonly used types of ISAs:
- Those that you save cash into known as cash ISAs
- Those that you keep investments in known as stocks and shares ISAs
- The other ISA investments are Innovative finance ISA's and Lifetime ISAs
Mayfair Capital offers an online stocks and shares ISA facility aiming to give you full control at the touch of a button. Our ISA can be used for both advisory and execution-only services.
How are ISAs different?
What sets ISAs apart from other savings and investment accounts is that they come with significant tax benefits. The interest you make on cash savings or the gains from investments are tax-free. Because of their tax benefits, ISAs could help your savings and investments grow faster over time.
Stocks and shares ISAs have the added advantage of helping safeguard you from a potential Capital Gains Tax (CGT) bill in the future. CGT is a tax on the gain you make when you sell or dispose of assets such as investments.
Can anyone have an ISA?
You need to be 16 or over to open a cash ISA and 18 or over to open a stocks and shares ISA and you must be ordinarily a resident in the UK.
Mayfair Capital Limited only offers clients the stocks and shares ISA.
How much can I save into an ISA?
For the 2017/2018 tax year the ISA allowance is £20,000. You can invest your ISA allowance fully as stocks and shares, cash, or any combination of the two.
It is generally considered that people will choose stocks and shares ISAs because they are looking for a better return from their savings as opposed to a cash ISA.
In a cash ISA the pace at which your portfolio grows will depend on the amount of interest you receive. In the current economic climate this can be challenging due to interest rates remaining low. Inflation can also erode the spending power of cash if prices rise faster than your savings grow.
Stocks and shares ISAs are designed to hold investments rather than cash and, over the longer term, investments do have the potential to deliver much higher returns than cash, although returns from investments are a lot less predictable and therefore there may be losses and your capital is at risk.
What to consider
Are you willing to take any risks with your money?
With a stocks and shares ISA, the money you pay into the account is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000. When investing you need to be willing to take some risks with your money because investments can go down in value as well as up. This means you could end up with less money in your stocks and shares ISA than you first paid into it. But, as previously mentioned, with investing there is also the potential to make far greater returns than cash.
How long are you planning to keep your money tied up for?
It’s generally understood that it’s not wise to invest for the short term so if you think you’ll need quick access to your money, a cash ISA is probably a better option. With a stocks and shares ISA, you should be prepared to leave your money invested for at least three years and ideally around five years.