Individual Savings Accounts

Individual Savings Accounts
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An individual savings account, commonly referred to as ISA, are a government backed tax exempt savings scheme which was first put into place in 1999 with the goal of encouraging individuals to start saving money. Whilst they were launched in 1999, the actual rules and regulations associated with their usage were reformed in 2008 in order to remove the confusing notions of mini-ISAs and maxi-ISAs and creating a more easily comprehensible system.

According to the new rules implemented in April of 2008, any individual can make an investment of up to £7,200 within any tax year (april to april), without having to pay any tax whatsoever. The individual savings accounts come in the form of cash ISA’s and stocks and shares ISA’s or even both. As of October 2009, this annual limit increased to £10,200 per annum for any individual over the age of 50 which is broadened to include everyone of any age by April 2010. The cash limit of the total allowance will increase from £3,600 to£5,100 and the remaining allowance can be invested in shares. As a result of the introduction of ISA’s, any former personal equity plans have now been merged with stocks and shares ISA’s.

A cash ISA gives individuals the opportunity to put their money out of their reach into an account that will allow them to benefit from interest as would be the case in an ordinary bank account or building society account but with the added benefit of being exempt from tax. A stocks and shares ISA on the other hand, will invest in the stock markets and whilst any gains the money makes are not actually taxed, the capital is liable to the various rises and falls that comes with investing in the stock markets.

Cash ISA’s are often a good way of investing money with the aim of gaining interest, avoiding tax and easy access to the funds within it, even at quite short notice whereas shares ISAs are typically considered to be a more long term investment.

Individual Savings Accounts generally be bought at any of the usual places such as banks, building societies, fund managers and supermarkets who all have a range of investment products. You may also see many of advertisements in the local papers and financial publications where companies allow you to purchase online which can be a quick and easy way of doing it although it is important to make sure you check all the terms and conditions involved. Professional and un-biased financial advice should be sought when choosing a reliable provider.

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