This is a guest contribution by Charles Dearing.
Turning 30 can be daunting, many have started a family and have those extra little ones to look out for and plan for; some are working towards the peak of their career with a good idea of how they are going to get there, but have yet to hit the big bucks, and then there are others who are happy to live day by day enjoying their life. Either way, looking at your investments in the form of Independent Savings Account, or ISA for short, could help gain you extra pennies and pounds on your hard-earned cash.
The ins and outs of ISAs
Each year an individual can save up to £20,000 of tax-free cash through an ISA. However, it is important to note that you can’t roll any left-over allowance over into the following year. The other stipulation is that you are only able to have one ISA in a single tax year, and once the money is withdrawn it loses its tax-free status.
To Invest, or Not to Invest
An Investment ISA is a normal investment that lets you use your ISA allowance to make it tax efficient, as explained by Money.co.uk.
For shares held within an ISA, you don’t have to pay dividends on them. However, according to Barclays if shares are held outside an ISA, all investors have a tax-free Dividend Allowance of £5,000.
In this type of ISA if your shares underperform, you could get less money back than you invested, but likewise your returns could far exceed the amount you earn from interest on any Cash ISA.
You can also diversify your portfolio by investing in several markets. Ensure the company is registered with the Financial Services Compensation Scheme to protect your money.
Are Cash ISAs worth it?
Put simply, Cash ISAs are savings accounts you don’t need to pay tax on.
They are flexible – most account providers allow you to simply put money into the account, and take out easily, however do check the rules on withdrawals as they do vary. The interest rate you receive on your savings depends on the providers.
Interest rates with some accounts can vary annually, whereas others are available for a fixed term. One pro of using a Cash ISA is that you cannot lose money with little risk involved. However, some Cash ISA interest rates are so low it may be worth considering a bank savings account to boost earnings in the shorter-term.
Advice
Always make sure you do your research, and compare providers to ensure you are getting the best deal, and where applicable seek advice about the best way to invest your money for both the short and longer-term.
As you plan for the future – no matter what form that might take – ensuring your money is invested in the most appropriate way for you could pay dividends further down the line.
This is a guest contribution by Charles Dearing.
