Cash ISA, Savings and Shares ISA explained

financial planning with isa cash isa and investmentsA Cash ISA or Cash Individual Saving Account to give its full title is similar to a normal savings account in that you can take cash out whenever you wish. The difference is the interest is not taxed. The tax man in 2012 got an extra £500 million in tax because people did not make full use of their cash ISA allowance. So you need to consider how wisely you are saving and setting aside your money.

Just like normal savings accounts there’s a variety of cash ISAs available, such as instant access, fixed rate, and accounts with base rate guarantees. We monitor the ISA markets and digest all the pro’s and con’s of each product as it becomes available so that we can accurately advise our clients on the best products to suit their needs.

A Stocks and Shares ISA is geared towards Share-based investments. Individual company shares can be bought and placed inside a self-select ISA. Stocks and shares ISA’s are usually held in collective investment products such as unit or investment trusts. These are usually pooled investments, and a fund manager picks a selection of shares based on set criteria and geography, then the returns of the investments depend on the collective performance of the shares picked. By placing these investments inside an ISA this affords you two tax advantages. Firstly, any profits made from any share price increase are not eligible for capital gains tax and secondly, it enables all the tax on bonds to be reclaimed.

When it comes to Individual Savings Accounts (ISA) and Investments (Shares and Stocks)

Think of Saving and Investing in these terms:

Saving is when you put money away in complete safety, and get it all back plus the interest

Investing is when you take more of a risk, a chance that you’ll lose some money or get lower returns, but have the possibility that your money will grow more quickly.