An Individual Savings Account is a tax wrapper around a savings or investment product which means that the interest you get is not taxed. The system started in 1999 when the then-chancellor Gordon Brown suggested it would encourage people to save. And they have proved popular. About a third of the UK adult population have a cash ISA. They collectively have £158bn saved in these accounts. Even at the height at the financial crisis, there were 11.3 million new cash Isas opened in 2008-09, with £28bn paid into them.
The ideas is that in times of low interest rates, the government wants more reward for those who have saved.
Over the years ISAs have become gradually less complex but it can still be worth consulting experienced IFA’S like Enable of Bishop’s Stortford to make sure you are getting the best out of your ISA allowance. Each tax year everyone aged 16 or over for cash ISAs or 18 for stocks & shares ISAs, has an ISA 'allowance' which sets the maximum that can be saved within the tax-free wrapper from April to April.
The current limit is £10,680, up to £5,340 of which can be in the form of cash or all of it in shares.
You can put £5,340 into a cash ISA, leaving £5,340 available to fill with shares or you can use it all for shares. You are allowed to invest in £10,680 worth of shares. However this leaves no room for tax-free cash savings. Many prefer to mix and match meaning some amount under £5,340 can be saved in cash, then the rest of your £10,680 allowance put in a shares ISA.
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