A Quick Guide to ISAs

Offering up a tax-efficient way to invest money, ISAs (Individual Savings Accounts) are one of the smartest ways to maximise the value of your savings. Indeed, allowing people under the age of 50 to invest up to £7,200 every year tax-free - those aged over 50 years can invest up to £10,200 - they represent an ideal opportunity for you to make the most of your money.



The financial experts believe that whether you open one for yourself, or as a gift for a relative, ISAs are better than most ordinary savings accounts because they tend to offer higher interest rates, as well as the fact that the returns are tax-free. However, they warn that not enough people are taking advantage of them.



Generally speaking, there are two different types of ISAs to choose from: cash ISAs or stocks and shares ISAs. While anyone over the age of 16 can invest in a cash ISA, you must be 18 to open a stocks and shares ISA.



With a cash ISA, it is possible to save up to £3,600 if you're under 50 or £5,100 if you're over 50, each tax year: the tax year runs from April 6 to April 5. A stocks and shares ISA, on the other hand, allows you to invest your full annual quota of £7,200 or £10,200, depending on your age.



As the name suggests, a stocks and shares ISA will invest your money into stocks and shares. Conversely, a cash ISA acts like a traditional savings account in that you can often have easy or instant access to your money. They are relatively risk-free and will guarantee you a return, as long as the interest rate remains above inflation.



It is also possible to split your annual ISA allowance into two, with one half going into stocks and shares and the other into a cash ISA. In this way, you are using your entire yearly quota, in order to maximise your savings potential, as well as reducing the risk of investing everything into one account.



If you have a Child Trust Fund, you can also turn this into an ISA when it matures, thus making the most of your child's saved finances. Not only is this a great gift, but an ISA can really help to ensure that the money your child has works as hard as possible to get the best return.



Whether you are looking to open an account for yourself, or as a gift for someone else, ISAs are a great way to make the most of one's savings. In order to obtain more information on the subject or to find the best account for your needs, it can be a good idea to conduct some research. The internet can be an ideal place to start, due to the wealth of information available.



Jonathan Wallace writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.