April 30, 2012

Individual Savings Account Is a Tax Efficient Way of Investment

Saving money has not been so easy before. A person with urge to secure their future can keep money in Individual Savings Account (ISA). They are easy to deal with and all you need to have contacts of an experienced financial institution to assist them out. Many people often find it hard to understand differences between ISA and ordinary savings account.

There is no doubt that savings account offer interest and is a secure option to save money. But ISA is a tax efficient way of investment. You can save your tax on invested amount as well as the interest you earn from it. Whatever is your investment or growth you do not have to pay capital gain tax or income tax?

There are two types ISAs- Cash ISA and Stock and Shares ISAs. Cash ISAs are relatively risk free. Cash funds grow at a moderate rate and you can withdraw cash anytime.
If you want to take risk in expectation of more return it is better to park your money in Stocks and Shares ISAs. With this type of investment you have to closely follow the market. There are chances that you may receive less money if the market is down. But these ISAs are good if you are thinking of long term investment.

But only UK residents can avail this facility of ISA. One has to be over 16years to open a Cash ISA and of 18years to start Stock and Shares ISA. There are certain rules attached with these investment funds. You need to know these in details to manage your funds efficiently. 

There is a limit on investment in a tax year. This annual limit is on the money you put in those accounts not on the interest received from it. You can create a Cash ISA and a Stock and Shares ISA in one financial year. You can either keep entire money with one account or divide it into two.

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