Everything you need to know about cash ISAs

By Christine Emelone
Friday, 1st April 2022, 2:30 pm

Saxo Markets UK have provided information on on everything you need to know about ISAs and when the deadline is.

Here is some guidance on the different types of ISAs you can buy and what your allowance is.

What is an ISA?

An ISA is an individual savings account which allows investors to reap tax-free benefits from saving. Any gains made on an ISA are tax-exempt. This makes ISA an attractive asset to investors.

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    What is the ISA allowance?

    For the tax year 2021/2022, the ISA allowance for an adult investor is 20,000. Aloowances are reset at the beginning of each financial year. This is normally during the first week of April.

    When is the ISA deadline for 2022?

    The deadline for your ISA allowance is midnight on April 5th. You must the remainder of your ISA allowance before this date.

    What type of ISAs can I invest in?

    Each ISA has its own pros and cons. The table below lists some key information in regards to the different types.

    Type of ISA

    Risk Level

    Description

    Cash ISA

    Low

    For saving (adult)

    Stocks and Shares ISA

    Low to high

    For investing

    Lifetime ISA

    Low to high

    For saving for retirement

    Help to Buy ISA

    Low

    For buying a first home

    Junior ISA

    Low to high

    For saving (children to teen)

    Cash ISAs

    Cash ISAs are tax-free savings accounts meaning you do not pay tax on any interest earned. If inflation creeps higher than the rate of interest, the real value of cash decreases so technically it is possible to end up with less money than you put in.

    There are three types of cash ISAs: Instant-access cash ISAs, Regular savings cash ISAs  Fixed-rate cash ISAs.

    Stock and Shares ISAs

    Stocks and shares ISAs are often used by investors to reap tax-free gains.

    It allows individuals access to invest in shares in  global financial markets. In addition to the standard profits accumulated through buying and selling, investors can also benefit from dividends paid by companies.

    These are a portion of the company’s profits which are paid directly to shareholders as a bonus for holding equity in the company. Depositing into a stocks and shares ISA offers total flexibility as investors can both deposit and withdraw freely without restrictions.

    Lifetime ISA

    A lifetime ISA is the most recent addition to the ISA family and is typically used to help individuals either save for retirement or their first home.

    They are a government-backed savings scheme in which the government will add an extra 25% bonus on any deposits into the lifetime ISA.

    The bonus paid by the government is paid monthly and helps individuals accumulate capital over time. Individuals can use the funds in their lifetime ISA to invest in both cash, or stocks and shares – allowing flexible management of funds.

    Help to Buy ISA

    Ideal for first-time home buyers, a help to buy ISA is very similar to a lifetime ISA, however, the funds are restricted to only purchasing a home.

    Luke Dods, Head of Retail Sales at Saxo Markets UK, said: “Becoming an ISA millionaire does not happen overnight. However, it can be achieved in the long-term.

    “Many people will also be unaware of the deadline approaching on April 5th, so thinking about the best ISA for you ahead of schedule would be a wise decision.”