Individual Savings Accounts

Individual Savings Accounts (ISAs) are tax-exempt savings accounts available to individuals aged 18 or over who are resident and ordinarily resident in the UK. These accounts offer a way for individuals to save and invest money without paying tax on the interest earned or capital gains accrued. At AHACCOUNTANTS, we advise individuals in the Nottingham area on tax-efficient investment strategies, including ISAs.

Key Features of ISAs

1. Annual Investment Limits:

1. • For the 2024/25 tax year, the overall annual savings limit is £20,000. This includes contributions to all types of ISAs.

2. Types of ISAs:

1. • Cash ISA: Savings held in cash accounts.
   • Stocks and Shares ISA: Investments in stocks, shares, or other investment products.
   • Innovative Finance ISA: Investments in peer-to-peer lending and crowdfunding opportunities.
   • Individuals can hold a combination of these accounts, provided they stay within the annual limit.

3. Flexibility:

1. • Money can be withdrawn from an ISA without losing tax benefits. Some ISAs, known as Flexible ISAs, allow savers to withdraw money and replace it without it counting toward the annual subscription limit.

4. Spousal Allowance on Death:

1. • When an ISA holder passes away, their spouse or civil partner can inherit their ISA allowance, which is equal to the value of the deceased’s ISA accounts at the time of death, in addition to their own annual allowance.

5. Tax Advantages:

1. • Income generated from ISA investments is exempt from income tax.
   • Capital gains on investments held in an ISA are exempt from capital gains tax.
   • While ISAs are part of an individual’s estate for inheritance tax purposes, they provide a tax-efficient way to grow savings.

Additional ISA Options

1. Help to Buy ISA:

1. • This account is designed for first-time buyers and offers a government bonus for savings used toward purchasing a home. While new accounts were closed on November 30, 2019, existing account holders can continue to save until November 30, 2029. The government provides a 25% bonus on savings, capped at £3,000.

2. Lifetime ISA:

1. • Available to individuals under 40, this ISA allows contributions of up to £4,000 per year, with a 25% government bonus (up to £1,000) until the age of 50. The funds can be used for buying a first home or for retirement after age 60. Withdrawals for other reasons incur a penalty.

3. Junior ISA:

1. • This account is available for UK resident children under 18 who do not have a Child Trust Fund (CTF) account. The annual subscription limit for Junior ISAs is £9,000 for the 2024/25 tax year. When the child turns 18, the account converts to an adult ISA.

Conclusion

ISAs are a powerful tool for tax-efficient saving and investment in the UK. With various options tailored for different financial goals—whether it’s saving for a home, retirement, or for a child’s future—ISAs offer significant advantages for individual investors. If you’re looking for guidance on making the most of your ISA investments or setting up an account, contact AHACCOUNTANTS for personalized advice in the Nottingham area.