Individual Savings Account

The individual savings account (often abbreviated to ISA) has been around for many years now. It is an attractive proposition for saving money, as you can see your money grow through either interest or performance. And any interest earned on it is tax-free. There are essentially two main types of ISA - cash, or stocks and shares (or insurance). The mechanism is simple – you deposit cash with the ISA provider and they will then be responsible for growing it in line with the nature of the particular product you have purchased.

As we mentioned before, one of the major attractions of an ISA is that it offers growth (up to a specified level) that is free of income or capital gains tax. In fact, this was partly the origin of this category of product as successive governments sought to encourage savings. It’s worth noting that there is no such thing as a ‘standard’ ISA as it is a general term used to describe a category of products. Some ISAs will grow your cash in line with the provider’s specified growth rate, others may offer variable rates and yet others may be linked to the performance of a given investment fund or funds. It is always highly advisable to check in detail the nature of the ISA you are considering to ensure that it will meet your needs. Not all ISAs offer a guaranteed return on your investment. As such you may wish to make detailed investigations relating to return risks with the provider concerned.

The Basics of an Individual Savings Account

• If you're thinking about investing in an ISA, it may be a good idea to double-check with the provider that they and their product meet current legislative requirements. If in doubt, a specialist finance company would be able to explain to you what these criteria are; 
• Her Majesty's Revenue&Customs (HMRC) defines the maximum amounts and tax-free growth that is permissible while retaining tax-free status. It may be advisable to consult their web site for the current limits and investment regulations etc;
• ISAs are now widely sold by banks, building societies, financial organisations and you can sometimes even see them offered by the larger retail outlets. The person who sells and administers and individual savings account is usually called the 'ISA Manager' and they must be registered with the Financial Services Authority for regulation and control;
• To qualify for tax-free status the scheme must also be registered with HMRC;
• If you are resident outside of the UK then sadly an ISA is not available to you.
• The individual savings account may offer some people an excellent investment route in certain circumstances and the tax advantages may be significant. It can however be a complicated area with a large range of options open to you and this is doubly so because it involves personal tax liabilities. It may be a good idea to seek expert advice from a specialist finance provider before making your final decision, as this is not something you'll want to get wrong!