What is your ISA for?

Over the past few years, we have seen the introduction of several different ISA’s: the Junior ISA (Jisa), the creation of the Help to buy ISA and the development of the innovative Finance ISA. Also, in April 2017 we are expecting the new Lifetime ISA.

ISA’s were introduced in 1999 and in 2015 a government report showed the total value in ISAs (excluding Jisas) was nearly £500 billion, which is more than the technology giant Apple is worth!

A quick reminder of the basic rules for a standard ISA:

  • The returns are tax free
  • You have to be over 16 to open a cash ISA and over 18 for a stocks and shares ISA
  • There is an annual limit to the amount you can invest which is currently £15240 per person per tax year and this can be made up of both cash and stocks and shares.

Which ISA is best?

This depends on what your ISA is intended for. As cash savings rates are so low it may seem unappealing to invest in cash ISA’s. However if you are saving short term (up to 3 years) then the cash ISA is still the best route as you know your money is available when you want it. For investors wanting a tax-efficient, long-term return (over 10 years) that will not be eroded by inflation, stocks and shares ISAs could be a more attractive option.

So what is your ISA for? Are you saving for that special holiday, a new car or maybe the children’s education or simply for a rainy day?