When you set your 2020 New Year Resolutions, did you say that you wanted to save money? If you did then it’s that time of year when you should be thinking about your savings account.
The new tax year started on the 6th of April, and from now until then, the banks will be getting ready to lure all of us potential savers with some great deals.
Using an ISA you can save £20,000 a year and you can protect this amount from the taxman. Research by Nationwide showed that thanks to these savings accounts, Britons save £680m a year in tax payments, an incredible amount of money. If your aim is to save money in 2020, then you should learn all there is to know about ISA’s.
Do you know about ISA allowances?
For the 2020-2021 tax year which ends on the 5th April you can save up to £20,000 tax free. Either in a cash ISA or a stocks and shares ISA.
If you’re feeling brave then you can invest the full amount £20,000 into a stocks and shares ISA account, but I’ll move on to the advantages and disadvantages of each a bit later on.
The ISA allowance has remained flat compared to last year.
What types of ISA accounts are there?
A cash ISA account works the same way as a normal savings account, but some providers offer different benefits, i.e. some providers let you transfer money in and withdraw money out without any penalties, but others do not.
Cash ISA accounts are great because their risk is minimal and your capital is totally safe. Just like A normal savings account, cash ISA’s come in easy access, notice and fixed rate versions.
Stocks & Shares ISAs
Stocks & Shares ISA accounts have a lot more risk assigned to them, and this is because if you invest your money in stocks and shares, then it can go down as well as up.
They are ideal for wealthier savers who want to spread their savings between different asset classes, so that they can see a return on investment over time. Investing books will explain all the different options available to you as a stocks and shares account holder.
What else do you need to know?
If you’re new to cash ISA accounts, then you should start with an instant access account. This means that you can withdraw and add money to your account as often as you want. It’s important to note that you can only put £20,000 in total into a cash ISA account, no matter how many withdrawals you make during the tax year, unless the account is specifically ‘flexible’, but you will need to confirm this with your provider.