Sunday, September 16, 2007

The Benefits Of Investing In ISAs

People are always looking for news ways in which to make cash savings or investments. One popular method of tax-free savings is by opting to save money in Individual Savings Account (ISAs), which were introduced by the UK government in 1999 to replace PEPS and TESSAs. Whether you choose to use an ISA to save cash or invest in stocks and shares, the benefits of ISAs are sure to be diverse and hugely rewarding.

In fact, the advantages of ISAs are numerous. For starters, there is no income tax to pay if you invest in an ISA, a factor which is a particularly strong selling point if you're a high rate tax payer. Under existing tax legislation, people paying higher-rate tax have to pay 25 income tax on every 100 received in dividends on an investment not held in an ISA. Therefore, investing money in an ISA eliminates this cost. And if you're not currently a higher-rate tax payer, investing in an ISA now will mean that if you move into a higher tax bracket in the future, you'll still avoid income tax on your investment.

Moreover, there are no capital gains to pay on an ISA. Capital Gains tax is a tax that is paid to the Inland Revenue on any rise in the value of savings and investments. Over the long term, small but regular payments into an ISA can generate tens of thousands of pounds - therefore, the long-term benefits of eliminating capital gains tax from your investment could be considerable, and certainly worth thinking about in advance.

Additionally, if you hold bonds in ISAs, you can still receive a tax free income. And even if you don't want to invest in bonds at the present time, there is always the possibility that you may want to in the future. In this sense, investing in ISAs is even more beneficial. Furthermore, you won't have to mention your investment in an ISA in your tax return form, which can be an arduous task. Ultimately, investing your money in an ISA means that you'll no longer need to worry about tax on your investment - a factor that is sure to be a huge weight off the mind of any tax payer!

Some of the best cash ISAs can be found in a range of locations, both online and on the high street, from a variety of sources. Many government institutions offer high interest ISAs, and banks and building societies also offer a selection of ISA accounts. But, wherever you choose to make your ISA investment, you can rest assured that the benefits are sure to be plentiful.
