Tax efficient savings: ask your IFA about ISA

It has been an unusual summer in more ways than one, the gradual introduction of post-Covid freedoms, staycations and unpredictable weather resulted in many of us spending time and money in different ways than before. For some, savings have taken on a new meaning and urgency. If that is you, read on..

ISAs, we've all heard of them, some of us have them and others still are curious as to what they are and how to take advantage of them.

In a nutshell, ISAs enable you to save and at the same time protect your savings from personal tax. They allow you to invest (currently maximum of £20,000 per annum) in an array of savings and investments with no income or capital gains tax liability. Bonus: there is no need to declare them on your tax return.

The different types offer different benefits and your Independent Financial Adviser will be able to recommend the most suitable one for your unique set of objectives.

Stocks and shares: Mixture of investment instruments, e.g. individual shares, bonds, investment trusts or open-ended investment funds.

Cash ISA: Bank or building society savings accounts, either instant access or fixed term.

Innovative Finance (IFISA): Peer-to-peer lending (P2P). This relies on investors lending money to borrowers in exchange for interest and is not covered by the Financial Services Compensation Scheme.

Lifetime ISA (LISA): created to help savers aged 18-40 to save for retirement or a first home. Maximum annual allowance is £4,000 with Governmental bonus of 25% on top.

Junior ISA (JISA): Parents or guardians can invest (on top of their own annual allowance) for the eventual benefit of minors under the age of 18, with the option of the child taking ownership at 16. The annual limit is currently £9,000.

The beauty of ISAs lies in the fact that you can spread your annual allowance of £20,000 between different types of ISAs and you can use different providers to limit institutional risk.

Withdrawals, full or partial, of cash or investments within the ISA is tax free and can be requested as and when the need arises.

Whilst ISAs present a neat solution to some savings conundrums, please note that as with any investments, the value can go up as well as down and you may not get back your initial capital invested. Any income generated is not fixed and there are no guarantees to the performance of such savings, do not rely on past results as an indicator of future returns.

The most important point to bear in mind, that even if ISAs are relatively easy to understand as a stand-alone product, the underlying investment strategy should be fully developed with the help of your Independent Financial Adviser to ensure that the chosen investments are precisely matched to your circumstances and suited to your personal risk profile.

If any of the above peaked your interest and you would like more information we will be pleased to help.

Silvia Johnson BSc(Hons) DipPFS EFA CertCII (MP) is a Director & Independent Financial

Adviser at Royale Thames Wealth Ltd.

Royale Thames Wealth Ltd is an Appointed Representative of New Leaf Distribution Ltd which is authorised and regulated by Financial Conduct

Authority number 460421.

The value of your investment may go up as well as down and the value is not guaranteed. Past performance is not a guarantee of future performance.

Wills and Estate Planning are not regulated by the FCA.

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