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Use your 2014 tax-efficient
ISA allowance by April 5th
Investments in a stocks and shares ISA are for the long term. The value of your investment and the income derived from it can go down as well as up and you may get back less than you originally invested.
There are two types of ISA (individual savings account): cash ISAs and stocks and shares ISAs. The advantage of having an ISA is that it is tax-efficient. Savings and investments held outside an ISA wrapper are liable to income or capital gains tax.
Every adult in the UK is allocated an ISA allowance each tax year. You can save up to £11,520 this tax year (which ends on 5 April 2014). You can invest the entire amount in a stocks and shares ISA or split it and put up to £5,760 in a cash ISA. See our guide on how to make the most of your allowance.
Financial advisors only tend to recommend that you use a stocks and shares ISA if you have money you are looking to invest for at least five years this is because stock markets can go down as well as up, so you could lose money. Find out how to decide if you are ready to invest.
Cash ISAs are like any other standard savings account, without paying tax on the interest you earn. Stocks and shares ISAs are a way of putting money into a wide range of investments without having to pay tax on the profits your make. We tell you how to use both.
You can invest in a single fund, more than one or pick the individual shares yourself. Find out what the options are.
Stocks and shares ISA glossary
Tax-exempt Individual Savings Account which enables you to earn interest tax-free. There is a limit on the amount you can save into a cash ISA in any tax year. This limit is £5,640 for the 2012/2013 tax year.
Another term for stocks and shares.
Financial Services Authority – the regulator of all providers of financial services in the UK.
The Financial Services Compensation Scheme which compensates investors in the event of the failure of authorised firms. The scheme covers insurance companies, deposit-takes and investment firms.
A fund is made up of a variety of different types of investment, so, for example, a UK fund might consist of the shares of a wide range of different UK companies.
An Individual Savings Account is a tax-free wrapper which enables you to save in cash and/ or stocks and shares up to a set limit each year. Returns are free of income and capital gains tax.
A stake in a company. Shares are also known as equities.
Value Added Tax. It is charged on most goods and services. The standard rate of VAT is 20%, although some goods and services qualify for a reduced rate of 5% or a 0% rate. Zero-rated items include most food, children’s clothing and books and magazines.
Our ISA service provides you with information on various ISA funds as well as guides to help you decide on the right product for you. We earn commissions based on arrangements we make to introduce you to product providers, further details are available on request. We do not provide you with advice and you should discuss specific product terms with the product provider.
† Based on an investment of £10,200, where a standard initial charge of 5.5% has been discounted to 0%.
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