TAX-FREE SAVINGS ACCOUNTS

The ISA (Individual Savings Account) is the most commonly used tax-free savings plan. From the

6th of April 2017 the limit that one can put into ISAs in this tax year is £20,000. There are various ISA choices which one can use but the total in the year cannot exceed the £20,000.

YOUR ISA MENU

A. The “old fashioned” simple ISA – can be invested in cash or stocks and shares. Good for anyone.

B. Junior ISA – only for those under 18. Anyone can pay into it for the person concerned,  e.g. grandparents. The maximum annual contribution is £4,080.

C. Help to Buy ISA – Only of real use for someone looking to save specifically to buy their first property. Anyone over 16 can start one, but the bonus from the Government is only added when the person actually buys their first property. If monies are taken from the Help to Buy ISA for other than purchasing the person’s own first home, no Government bonus is added to the monies withdrawn. The maximum that can be saved in the Help to Buy ISA is £1200 initially and £200 per month thereafter up to a maximum of £12,000. The Government bonus added is 25% up to a maximum of £3000.

D. Innovative Finance ISA – High risk. You lend your money through websites regulated by the FCA (Financial Conduct Authority). These are known as peer-to-peer lending platforms or “crowd-lending”. The expected return is approximately double the rates offered by Cash ISA providers. For more information go to MoneySavingExpert.com – “Peer to Peer Lending”

E. The new Lifetime ISA (Lisa) launched 6 April 2017. This is only available for those aged 18 to 40. It is complicated but generally it would suit someone saving for buying their first property or as an alternative to a pension – particularly for someone who is self-employed. The maximum you can put in is £4,000 per annum. The Government will add a 25% bonus each year. The Lisa can be invested in cash, or stocks and shares. Note: The 25% Government bonus is added annually to what you put in, but monies cannot be withdrawn before age 60 unless it is being used for buying a first home. After age 60 it can be used for any purpose. Withdrawals for any purpose other than the home purchase before age 60 are subject to a 25% penalty. The Government will only add its annual 25% bonus for monies put into the Lisa up to age 50.

Note:

Lisa's are not yet broadly available as many providers consider them too complicated. Search the Internet if you want to know what choices there are.