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ISA Investments – what are ISAs, how to choose the right one for you; comparison and rates


The Individual Saving Accounts, mostly famous midst the citizens as the following abbreviation i.e. ISAs, are the best saving method you can choose when you want to save and invest your money.

This is the best tax-efficient way you can pick out in order to put your money every tax year.

Let’s start with the diverse types of ISAs so you can decide and choose the best option for yourself. Relying on thekind of ISA you choose, every single person could be able to withdraw money from an ISA and pay it back in again without affecting your £20,000 allowance. The only necessary circumstance here is that you need to be sure that any money you withdraw is paid back in during the same tax year.

So, the first and most famous is the Annual ISA Allowance. Once our government set your amount of money, that you can add to ISAs every tax year before you start paying Income or Capital Gains Tax, is the so-called annual allowance. A new allowance is received every single tax year and you are free to pay into ISA and also keep your savings within the ISA. Every person will benefit from the tax-efficiency as long as the money is kept in the ISAs. I guess that the great thing here is that you don’t need to use the whole portion of savings of your ISA allowance because there is a maximum amount. On the other side, the minimum amount may vary: you can pay the money regularly, pay in a lump sum, or go for a combination of the two. As an example, the moneypurchase annual allowance allows you to receive tax relief on contributions of up to 100% of your earnings or £4,000, whichever is the lower.

In case you are ready to take some risks with your savings, the best offer for you is the Stocks and shares Isas which offers the possibility of higher returns than cash Isas (this is simply a tax-free savings account). Stocks and shares Isas allow you to put your money into various types of investment e.g. unit trusts, open-ended investment companies (Oeics) and investment trusts, as well as government bonds and corporate bonds. You can also buy individual company shares and put them into your Isa. To conclude, if you are a person who loves to take risks, this is the greatest offer you can choose because the only thing that you should do is to invest and be ready for the investments to go up but as well down indeed.

Every tax year you can put money into one of ISAs runs from 6 April to 5 April. As an example, during the 2020-21 tax year, which runs from 6 April 2020 to 5 April 2021, you can place up to £20,000 into an Isa. As we said,it is possible to distribute your Isa allowance among different types of Isas including cash and stocks and shares, using whatever balance you prefer.

The next type of ISA is the so-called Funds which can also be split to two other kinds: actively managed and passively managed funds. The first have a fund manager who makes the investment decisions on your behalf with the goal of making better returns, and the second type follows a defined stock market. They differ from the actively managed funds because of the lack of a fund manager, and also due to the fact that the fees and charges are generally lower than the first type.

Now, we are going to present you some other ISA types. The following ISA kind, which is called the Gilts, is issued by the government and are usually seen as a lower-risk option than stocks or shares. You can also choose from Help-to-Buy ISA, Innovative Finance ISA (when you invest your money in peer-to-peer loans), Lifetime ISA (here, people between the age of 18-39, who are saving for their first home or their retirement, will receive a 25% bonus on the invested money from the government), Junior ISA (you are allowed to save money in the child’s name and all of your investments will be kept until they reach 18), etc.

Best performing stock and share ISAs

- Nutmeg - they are asking questions to decide how much risk you are willing to take in order to decide with portfolio will be best for you. Depending on the risk is the ROI so it's all up to you. Average ROI for 2019 is 12.80% on Portfolio 5(medium risk).

- Moneyfarm - they are a close match to Nutmeg. Portfolios are rebalanced every 3 months so you have to keep a close eye on all. Average ROI is 12.11% on Moneyfarm risk 4 for 2019

- Wealthsimple - they have many portfolios as well and the best performing for 2019 was Wealhsimple Balanced SRI portfolio(risk level 4) with ROI in 2019 of 16.61%.

To finalize the topic, I’d like to remind of my readers to remember that the value of investments can rise but unfortunately, it could also fall.You can receive less money than the initially submitted sum of money you invested. Like every normal person, you need to be sure that your money is safe and sound and you will receive more than you’ve paid at first but if you’re not sure about investing, you need to find some another independent advice. Everything changes as well as the tax rules so their effects on you will definitively depend on your individual circumstances.

You might be interested to know about: Junior ISAs.

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