ISAs allow UK investors

to reap tax-free rewards

ISAs allow UK investors to reap tax-free rewards

While tax evasion continues to be a growing problem in the states, the UK government have just taken steps to help more of their citizens reap tax-free investment rewards. By upping the limit that consumers can spend on Individual Savings Accounts, or ISAs and they are known, more people than ever can now benefit from tax-free savings too.

The big difference between an ISA and any other kind of savings or investment account is that the interest made in an ISA is not taxed in any way. This often allows ISA users to accrue a greater net interest than those investing their money in regular savings accounts.

The ISA allows people in the UK to invest their cash in two ways, either with a cash ISA or a stocks and shares ISA.

A cash ISA works in a similar manner to a savings account, however, if any money is withdrawn from the ISA, it cannot be replaced until the beginning of the following tax year. This is also a limit place don the amount that can be invested in a cash ISA - £5,100 – and UK citizens are only legally allowed to set up one ISA in a tax year.

With a stocks and shares ISA, the investment limit is higher – it has just been raised by the British government to £10,200. And any returns made on the stocks and shares that are invested in via this type of ISA are also tax-free.

The stocks and shares ISA also makes it possible for UK investors to purchase corporate bonds, with returns from these investments also being tax-free. The British government have also just made it possible for people to purchase corporate bonds in lower denominations than ever before, allowing more people than ever before the chance to invest in a product that has never been open to them before.

British companies specialising in corporate bonds, such as the long-standing Legal & General have sought to make it easier than ever for new investors to make the most of the new corporate bond arrangements, by setting up corporate bond ISA funds, where investors pool their money and a professional fund manager runs all investments. See the Legal & General website to find out more about corporate bonds.

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