Stocks and Shares ISAs

As the name suggests, stocks and shares ISAs are directly invested in shares recognized by any recognized stock exchange. While these types of ISAs may carry more risk, they also hold the potential for a much larger rate of earnings. The tax benefits for shares ISAs are similar to that of a cash ISA, since you do not have to pay taxes on any earnings you make by selling your shares. Higher rate taxpayers may see additional tax benefits as well. You can also contribute more to a shares ISA annually – up to £7,200 in this type of ISA alone.

Choosing the Best

Shares ISAs tend to be recommended to individuals who are looking to invest over the long term. If you will need your ISA money within the next five years, a cash ISA may be the better option for you.

However, there are other factors that play into choosing your ISA as well, including the state of the stock market and current savings rates. It is also important to note that while cash ISAs can be moved into shares at any time, you cannot take a shares ISA and convert it to a cash account while keeping your tax advantage.

Choosing the right ISA for your specific financial situation is an important part of building a successful investment and savings portfolio. With these basic facts in mind, you should be able to determine whether a cash or shares ISA will meet your needs better. For more information about different ISAs, contact your financial advisor.