With the uncertainty of the economy and sparse opportunities for the average Joe to accrue additional profits from annual income, it’s more important than ever to begin saving for your future. Instead of opting for the traditional savings account, consider this alternative that may initially sound too good to be true: an ISA account. An ISA account, also known as an Individual Savings Account, allows you to save or invest money without paying taxes on accruing interest or investment returns. This tax-efficient method of saving shields your money while protecting it from depreciating in value as it sits in the bank. Aside from this bonus, ISA accounts offer a range of other benefits that make it best choice for anyone looking to do some serious saving.
Another benefit of opening an ISA account is the generous annual deposit limit. Account holders can put a maximum of $15,000 into their account each tax year. But his has proven to be more than enough – according to Moneywise.co, the average opening balance of an ISA account is just over $10,000. Also, you have free range to transfer money from ISAs opened in previous years into your most current, allowing you to surpass the $15,000 threshold set on the account.
The tax benefits of opening an ISA account cannot be emphasized enough. Again, you do not have to pay taxes on the account, including Capital Gains Tax on investments, regardless of the investment growth of the amount of money you take out of the account. These accounts are also income tax free, however dividend income can be subject to a small percentage of tax at source. You also don’t have to mention ISA’s on tax returns, making it an even simpler and convenient method to hold on to saved funds.
ISA’s aren’t just limited to adults; children and teenagers can also have their own ISA accounts. While children have a lower limit of about $4,080 yearly, teens (16 and older) are able to open an adult account as well as a junior account, allowing them to accrue a higher allowance than anyone else that opens an account.
Although there have been some limitations on ISA accounts specifically related to withdrawing and lending money in the past, this is no longer the case. Through platforms such as Zopa and Ratesetter, ISA account holders are now able to lend money to others via peer-to-peer lending while still avoiding any taxes on money accrued from interest.
The benefits of opening an ISA account are unquestionable and with tactful financial planning, can lead to a turnover of great additional tax-free profits. Rather than constantly struggling to maintain a goal-focused balance on a traditional savings account, an ISA account is a great way to keep your money safe while allowing it to accrue money over time. Consider the freedoms of an ISA account as an instrumental tactic in your financial planning for the future, and you will find that the turnout will be highly beneficial.