As you may be aware, this tax year all British citizens are entitled to put £15,240 into a tax-free ISA. So with the 5 April deadline fast approaching there is only limited time left to do so before the end of the current tax year.
Before you jump in, we're here to explain exactly what an ISA is and why taking one out is definitely something you should consider.
Get into the habit of saving regularly
Saving, other than for specific events such as a holiday, wedding or house deposit seems to have gone somewhat out of fashion compared to a few generations ago when regular saving was an ingrained habit. This is partly down to the fact that credit is so easily available now, resulting in many of us paying things off every month, rather than saving. Getting any debts in order obviously needs to be a priority, but immediately behind that should be starting to save regularly.
By saving regularly and building up a ‘nest-egg’, you are not only securing yourself against things going wrong such as redundancy or the boiler breaking, you are also moving towards financial independence and the freedom to make life choices that are not solely dependent on earning your monthly pay cheque.
What is an ISA?
ISA stands for individual savings account, and in that sense is broadly similar to a normal savings account with a high street bank. The crucial difference is that with an ISA the interest you earn will be paid to you 100% tax-free, as opposed to with the tax already deducted. As so little in life comes tax-free, saving into an ISA makes a huge amount of sense as it allows you to keep your savings safe from the taxman.
Why take out an ISA?
If you are looking to save money, an ISA should definitely be high up on your list of options as you get all of the interest, meaning that your savings will grow faster. The tax advantages of ISAs depend on your individual circumstances which, like tax rules, may change in the future, but at the moment (until 5 April 2016 at least) an ISA is a fantastic option for all savers.
Which ISA should I take out?
There are two types of ISA, cash and stocks and shares, and you can use your £15,240 tax-free allowance in either type or a combination of both.
The big difference between a cash ISA and a stocks and shares ISA is the way your money is used. Whilst a cash ISA is like a normal savings account, a stocks and shares ISA invests your money in the stock market, meaning that whilst the risks could be higher, the gains are potentially much greater.
You must be aged 18 or over to open a stocks and shares ISA or aged 16 or over for a Cash ISA.
Transferring your ISA
While you can only pay a set amount into an ISA each year, you can transfer an ISA balance as many times as you like, meaning that you can hunt down the best rate for your savings each year and transfer old ‘pots’ (so long as the account allows and subject to fees) to avoid getting stuck with stale old rates.
The looming 5 April deadline
If you don’t use your annual £15,240 limit for the 2015-16 tax year before the 5 April 2016, it will be gone forever.
My Sovereign Investment ISA from Forces Financial
The My Sovereign Investment ISA is a stocks and shares ISA. It is designed exclusively for our military customers that want to invest monthly or as a lump sum, with the view of a medium to long-term investment (5-10 years).
As previously mentioned, a stocks and shares ISA typically offers the potential for a greater reward but come with the increased risk that you may get back less than you have invested. The My Sovereign Investment ISA however offers one key difference; it goes much further for you by providing the safety that your savings will be guaranteed on the 10th anniversary, providing you haven’t made any withdrawals. Essentially, you get the benefits of a stocks and shares ISA alongside a long term security for your investment.
Our My Sovereign Investment ISA is available for the Armed Forces family and guarantees that you get back at least what you have paid in after 10 years (subject to terms) and can be started with as little as £10 per month or a lump sum exceeding £100.