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Investments & Saving - ISAs

What is an ISA

There are many types of ISAs in the media nowadays. Here we aim to explain some of the most common terms that you may come across.

Individual Savings Accounts (ISAs) were introduced in April 1999 to replace the old style PEPs and Tessas. Yet many people get confused, thinking of an ISA as a complex financial product, and become wary. This is wrong, it's simply a tax free wrapper into which you can place either cash or shares. So the advantage from a non ISA account is that the return in the ISA account will be more as your ISA account will not be taxed.

Cash ISAs

Cash ISAs are one of the most tax-efficient ways to save your money because you pay no income tax on the interest you make. Depending on your requirements, you can choose from a wide range of Cash ISAs, including fixed or instant access, or Cash ISAs that aim to pay a return linked to the performance of the FTSE 100 Index, while protecting your capital. 

Income ISAs

Income ISAs aim to pay a regular income payment on your investment with no income tax liability. There is a range of Income ISAs available, meaning that you can choose to receive any income either monthly, quarterly, or annually. You can also choose one that suits your investment objectives and attitude to risk.

 Growth ISAs

Growth ISAs can include  investments with the potential for tax-efficient returns and the opportunity for growth. Growth ISAs are intended as medium to long term investments, and generally perform better over the long term than some other asset types, including cash. Some of the different growth ISAs available include structured growth ISAs and Fund ISAs such as those that invest in emerging markets.
Commodity Fund ISAs

Commodity fund ISAs invest directly in commodities, such as precious metals or natural resources, or in a fund which invests in commodity companies, such as agriculture, energy, or mining companies. By investing in a commodity fund ISA, you can benefit from not paying any capital gains or income tax on any potential returns.  However, you have to bear in mind the risk for these investments can be quite high and you may not get back the capital that you invested.

Ethical Fund ISAs

Ethical fund ISAs are those which invest in companies that are deemed to be socially responsible, in terms of human rights,  environmental impact and meeting religious beliefs. By using your ISA allowance to invest in ethical funds, you can benefit from any growth of companies that have a socially responsible ethos.

This can mean companies which take affirmative action towards being ethical, such as those involved in developing green energy, or ethically neutral companies which endeavour not to violate human rights or leave behind a carbon footprint. Ethical fund ISAs allow you to shelter any potential returns from tax, diversify your investment portfolio, and know that you are helping to make the world a better place. Compare some of the ethical funds available for ISA investment in the table below:

Non  Isa  Investment

This will have a bigger range of Investments and  can include all of the above plus other bouitique investments that are not available within an ISA. However, any returns, whether income or Capital gains will be taxable at your marginal rate of tax.

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