There are several types of ISAs available in the UK, each with its own unique features and benefits. The common types of ISAs are:
Cash ISA: A Cash ISA is a tax-free savings account that allows you to deposit cash and earn interest without paying any tax. The benefits of a Cash ISA include tax-free interest, which can help your money grow faster over time, and a variety of options, including instant access, notice, and fixed-term cash ISAs.
Stocks and Shares ISA: A Stocks and Shares ISA allows you to invest in stocks, shares, investment trusts, and other eligible investments without paying tax on any returns. The benefits of a Stocks and Shares ISA include the potential for higher returns than a Cash ISA, tax-free growth, and a wide range of investment options to choose from.
Lifetime ISA: A Lifetime ISA is a savings account designed for those aged 18 to 39. It allows you to save up to £4,000 per year and receive a government bonus of up to £1,000 per year until you turn 50. The benefits of a Lifetime ISA include a government bonus that can help boost your savings, tax-free growth, and the ability to use the money for buying your first home or for retirement savings.
Innovative Finance ISA: An Innovative Finance ISA or IFISA allows you to invest in peer-to-peer (P2P) lending or crowdfunding platforms. The benefits of an Innovative Finance ISA include the potential for higher returns than traditional savings accounts, tax-free interest, and the ability to support innovative and socially responsible projects.
Junior ISA: This type of ISA is designed for parents or legal guardians to save for their child’s future. You can save up to £9,000 per year tax-free for your child until they turn 18. The benefits of a Junior ISA include tax-free growth, the ability to start saving for your child’s future early on, and the potential to encourage responsible saving and investing habits.