What Is An ISA? How Many Types Of ISAs Are There?

ISAs are some particular savings accounts that allow the account holder to save or invest money according to his preferences and his needs. It is indeed a really popular kind of account, which is currently available for all UK residents over the age of 18 and in some cases even for underage people. An ISA is an Individual Savings Account, which can be opened to save money, to invest it and to give it the chance to grow over time in a tax-efficient way. As a matter of fact, one of the main reasons for the great popularity of ISAs is the opportunity for the holder to invest without paying any tax.

Even though it is indeed a really convenient type of savings account, it is always better to keep in mind that if you open an ISA, you’ll be investing your money and it is known that every kind of investment comes with a risk. When investing money, you should always be prepared to get back less than you deposited: this is due to the market’s constant swings.

Individual Savings Accounts come in many different types in order to meet the preferences of many people: whichever account you’ll decide to open, every ISA comes with a restriction on the amount of money you can deposit. The annual ISA allowance is currently set at £20,000 per year for all adult ISAs, at £9000 for Junior ISAs and at £4000 for Lifetime ISA. If you think opening an ISA might be a good idea for you, keep on reading. In the following paragraph we’ll show you how many types of Individual Savings Accounts there are.

What is a stock and shares ISA?

A Stock and Shares ISA is a particular kind of Individual Savings Account which has been specifically intended to let the account holder invest funds in stocks, shares, bonds, real estate and more. Just like any other kind of ISA, by opening a Stocks and Shares ISA you won’t be just putting money away, but you’ll be investing it. This means your investment will be subject to the market’s swings and you might end up getting back less than you deposited. For this reason, you should always take into account any possible risk and open a Stocks and Shares ISA that’s really worth it and which best suits your needs and financial situation. This kind of account gives you the freedom to choose your own investments free from UK tax and to withdraw your money whenever you want.

What is a Cash ISA?

A Cash ISA is another type of Individual Savings Account which can be opened by all UK citizens over 16. Just like any other type of ISA, by opening a Cash ISA you’ll be able to save or invest money in a tax-efficient way. In addition to that, the account is considered to be safer than a regular ISA because the fund you deposit on it aren’t subject to the market’s swings.

What is a Lifetime ISA?

Lifetime ISA is a different type of savings account which has been specifically designed to help the holder to make life-related purchases, for example, to buy the first house or to save for retirement. It can be opened by all UK citizens between 18 and 40 years old.

What is an Innovative Finance ISA?

Another common type of savings account is the Innovative Finance ISA, also called Ifisa, which lets you lend money to borrowers with the goal to get it back with interest. Even if your money will always be protected from all UK taxes and the interest rates are generally high, this kind of investment involves several risks.

What is a Junior ISA?

Junior ISA is a whole different type of ISA: it has been specifically intended to save money for your underage children’s future. It can be opened by a parent or by a legal guardian, and other family members and friends are also allowed to contribute.