What is a Stock and Shares ISA?

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What is a stocks and shares ISA and why it is so popular these days? ISAs are Individual Savings Accounts that have been specifically intended to give you the chance to save or invest money depending on your needs and preferences. What makes ISAs so popular is a particular rule: no matter what you intend to do with the money you put on your ISA, it will always be protected from UK tax. In fact, every type of Individual Savings Account currently available in the United Kingdom works in a tax-efficient way. The most common type is called Stocks and Shares ISA, a particular type of account that gives you the freedom to invest in shares, stocks, bonds, land, properties, and more. Even though your money will always be protected from tax, you should never forget about the market volatility. In fact, even though investing can be a solution to make your capital grow, it is also a really risky practice: every move you make will always be subject to the market’s constant swings, which make the outcome of your investments unpredictable. That’s why when you start investing your money you should always prepare yourself to get less than expected. However, Stocks and Shares ISA represents a really popular choice also among first-time investors who want to embark on this new financial journey. If you want to find out more about the features, rules, etc. of ISAs, you can find many articles about it on the Internet, such as this blog post.

How do ISAs work?

Stocks and Shares ISA isn’t the only type of Individual Savings accounts currently available for UK residents. In fact, the Government has designed many different types to meet the needs and preferences of as many new investors as possible. Even though every plan is unique and different from the others, some policies apply to all of them. For instance, every trust available is tax-free. Also, they all come with a limit on the volume of money that you can deposit in a year. This value is called Annual ISA Allowance and it now amounts to £20.000 per year for all plans except for the Junior ISA, whose allowance is currently up to £9.000 per year. Now, let’s have a look at all the different types of ISA available for UK residents.

How many types of ISAs are there?

ISAs come in a great diversity of types, each of which has been intended to meet the needs of certain categories of people. Along with Stocks and Shares ISAs, which today represent the most popular type of Individual Savings Account, there are Cash ISAs. It can be opened by any UK resident over the age of 16 and it is intended to help people save money and earn tax-free interest at the same time. Another kind of ISA is the Lifetime ISA, which has been designed for holders who want to put money aside for their future. This particular type of account is intended to help you make life-related purchases, such as the first house. It is available for all British citizens between 18 and 40 and it lets you deposit £4,000 per year. You’ll also be able to count on a 25% bonus from the Government. On the other hand, Innovative Financial ISAs have been designed to give investors the chance to lend money to companies to earn interest payments, which will also be protected from tax. Lastly, you can open a Junior ISA to save money for your underage children’s future. The annual allowance for this account amounts to £9.000 per year, which can be deposited by a parent, a legal guardian, and other family members and friends as well.

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Watch My Wallet has everything you need to know about money, written by real people who’ve been there. Inspired by the philosophy of Early Retirement Extreme (ERE), our goal is to make informed decisions about our finances in order to achieve financial independence.