An ISA is a type of account that allows the investors to save and grow their money over a period of time without having to pay tax on the interest. Other types of savings accounts charge an income tax on the interest that the money accumulates. Furthermore, the holder does not have to pay capital gain tax, regardless of the growth rate of the investments, or the amount withdrawn.
Types of ISAs
As an investor, you can select either of two ISAs. You can either choose to save your money in a Stocks and Shares or Cash ISA. In both accounts, the returns are not taxed.
It is also referred to as the basic ISA. It’s further divided into three sets;
Fixed rate account
This type of account is meant for account holders who would like to keep their money locked up for quite some time, ranging from two to five years, thereby attracting a high interest rate. Basically, the longer your money is tied up, the higher the interest rate.
A saver using this account has the ability to either deposit or withdraw from the account at any time.
This type of account however, does not offer constant interest rates. The value of the savings will increase once the rates increase, but as they drop, the savings will also be affected negatively.
Regular savings account
The interest on these accounts is normally constant over a period time, a year for instance, provided that the … Read More . . .