How Much Can You Invest in an ISA?

How Much Can You Invest in an ISA?

Your tax-free allowance is annually subject to change, currently your annual allowance for an ISA in 2021/22 is £20,000, but you can only invest with one provider in a single tax year. Investing this amount would use up your full ISA allowance.

Some people find it easier to manage their finances if they’re consolidated in to one account, however, if you’d rather split your allowance between a Cash, Innovative Finance and a Stocks and Shares ISA, you can choose to split your ISA allowance as you see fit.

What are the Three Kinds of ISA and What Can They Offer Me?

1) Cash ISA

• A safe way to start saving, there’s no risk and you are guaranteed to withdraw the same amount you deposited (unless you have been subject to penalty charges for closing an account early)
• Fixed or Variable rates of interest available
• Flexible accounts where you can access your money whenever you need to are available

2) Stocks and Shares ISA

• Possibly gain much higher returns than on a Cash ISA
• Some risk involved, you could withdraw less than you deposited
• Ready-made portfolios, managed accounts and risk assessed options are available to make investing easy

3) Innovative Finance ISA

• Potentially receive a higher rate of interest than a standard Cash ISA
• Peer to Peer lending is fully regulated by the Financial Conduct Authority
• Some risk involved
• Currently over £5+ billion has been lent in the UK and its only growing

How to Choose the Best ISA?

Choosing the best ISA can be difficult, particularly when there are so many options to choose from. Many people are torn between investing their full ISA allowance in to one ISA or splitting it between Cash, Stocks and Shares and Innovative Finance ISA accounts.

The answer purely depends on your financial circumstances and your savings goals. However, by comparing the options available then you should be able to make a decision on what works best for you.

Cash ISAs are a safe option and you’re guaranteed to make money on your savings. With a Cash ISA, you are guaranteed a fixed rate of interest; they are designed to protect your capital, so many people feel that this is the safer option.

The low interest rates currently offered by banks has meant that more people than ever before are considering investing their money in Stocks and Shares or Innovative Finance in hope of higher returns. Traditionally, investing has always reaped higher rewards but the element of risk involved means that you could also be left with less than you originally invested.

While many people are put off by this, with many platforms offering ready-made portfolios and options where your funds are managed for you, it’s really never been easier to start investing.