Since introduced in 1999, Individual Savings Accounts (ISAs) have proved one of the most popular and tax-efficient ways to save and invest for the future. In his March 2014 Budget, the Chancellor sprung a welcome surprise when he announced sweeping changes to ISAs, designed to encourage people to save more by offering bigger tax breaks and greater flexibility.
The ISA allowance for 2014/15 was increased by nearly 30% to £15,000 and the changes now allow full flexibility in the use of cash and investments within the overall annual limit. But that flexibility brings an increased risk that savers waste this valuable opportunity to create long term income and wealth. Over £226 billion is deposited in Cash ISAs, yet the average account is paying interest of just 1.18% (source: Bank of England, June 2014).
Note: The favourable tax treatment given to ISAs is subject to changes in legislation and may not be maintained in the future. The value of an investment will be directly linked to the performance of funds you select and the value can therefore go down as well as up. You may get back less than you invested.
An investment into a Stocks and Shares ISA will not provide the security of capital associated with a Cash ISA.