Are you dreaming of becoming a millionaire? With good and proper ISA management it is all possible!
Here are some ISA opportunities that will help you maximize on your returns and potentially change your financial life.
Currently the annual tax-free allowance for ISA’s is £15,240.
If a couple maximizes on their full annual allowance they could have a million pound in the bank within 20 years. Or, for an individual, it’s 30 years. Just imagine the retirement!
1. Risk and return
There are no longer any restrictions on how you split the annual allowance between two types of ISAs
· Cash ISAs
· Stock and shares ISAs
It is simply a choice of how much risk you are willing to take.
With cash ISAs the money is protected. However, returns are lower to reflect this.
With shares ISAs there is much greater potential of return, however much higher risk.
A middle-ground option could be to split your investments between the two share types.
2. A little extra left for your loved ones
There’s a tax-bonus that comes with investing in the London Alternative Investment Market (AIM) through your ISA.
AIM investments are exempt from inheritance tax if held for two years. Therefore you can leave a little extra behind for your loved ones.
3. P2P lending
This April a new Finance ISA was realized that widened the potential of investment further.
Peer-to-Peer (P2P) finance Platforms
P2P finance platforms are a venue for savers to lend money directly to borrowers at a chosen rate and potentially earn higher returns.
P2P is now classed as a third type of ISA meaning you can invest the full £15,240 of your annual tax-free ISA allowance.
4. ISA’s are at the peak of flexibility
In the past ISAs have been relatively inflexible. Since George Osbornes new flexible ISAs have been introduced this has all changed.
You can now replace cash you have taken out of your ISA during the tax year. Any money taken out and replaced doesn’t count towards your annual allowance limit.
For instance, if you take out 10K from your ISA, you are then able to put £25,240 into your ISA during the same tax year.
5. Junior ISA
Junior ISAs are money that is set aside for the younger generation.
A tax efficient investment in cash or stocks and shares of up to £4,080 was allowed for 2015/16.
Any money put into a JISA will be kept until the child turns 18.
6. ISAs and the high street
During April 2016 the government will also introduce a tax-free allowance on High Street Bank savings of £1,000 for basic-rate taxpayers and £500 for higher-rate payers.