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What are ISAs and are they worth having?

ISAThere are many ways to save money and one popular choice is that of an Individual Savings Account, or ISA. ISAs are very similar to regular savings accounts, except you do not pay tax on the interest that you earn.

At the end of last year, many people withdrew money from ISA’s as the rates had not been as good over the last few years. However, despite the low rates, it is still worth having an ISA for many reasons, which we will outline.

More flexibility in ISAs than before

ISA’s are now set up to give you more flexibility than previously. There are now the options to save, either with a cash ISA, a Stocks and Shares ISA or both. There are also options to split your allowance (£20,000) between Help to Buy, Lifetime ISA or an Innovative Finance ISA too.

Help to Buy ISA

With Help to Buy ISAs, as well as your savings not being taxed, you will also receive £50 bonus from the government for every £200 saved. You can pay up to £200 per calendar month into your ISA, but an additional contribution of £1000 can be made when you first open the account. Once you have purchased a property, you will receive the government bonus, which is calculated based on the amount of money you in your ISA.

Lifetime ISA

LIfetime ISAs are available for people aged between 18-39 years, who have never owned a property. You are able to save tax-free and up to £4000 per year will receive a 25% bonus contribution from the government. The money can be withdrawn to purchase a property and you are able to withdraw the savings for other purchases, however you will incur a 25% penalty to do so.

Innovative Finance ISA

Innovative Finance ISAs (IFISA) involves peer-to-peer lending where investors are matched up with borrowers who may be individuals, businesses or property developers. Higher rates of interest are a bonus of this, as the bank is not involved in this type of borrowing. You can save up to £20,000 as a mixture of cash, stocks and shares or an innovative finance ISA, but are only allowed to open one new innovative finance ISA each year.

It can be confusing trying to work out the best savings option for you. At Cotswold Financial Planning, we are able to advise you on all of your options so that you can be well equipped to make the best decision for your situation.

If you would like to find out more information on ISAs to see which savings option would be best for you, please contact us on 01608 651608 or fill out our enquiry form and one of our experienced and knowledgeable advisors will assist you in your enquiry.

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