Compare ISAs: - Individual Savings Accounts
ISAs are UK collective investments held in a tax free wrapper, meaning you are not liable to income tax on any withdrawals you may make or any capital gains tax if and when you eventually decide to surrender it, and one of the best aspects is not having to declare the income to the Inland Revenue. Because of the preferential tax treatment, ISAs are most people’s first choice when they have some money to invest, particularly if they are a higher-rate tax payer.
ISAs no longer come in maxi and mini versions, the rules changed on the 6th of April 2008. Instead of having prescribed limits on the cash an equity splits in a maxi ISA, the new ISA allows you to invest whatever percentage in equities you wish. You can only invest up to £3,600 (50%) in cash. If you only wish to invest in cash be careful – you may get a better return from a taxed bank account than you do from some ISAs – always compare your options to see what the charges are. If you wish to invest in equities there are literally hundreds of funds to choose from. Some people like to keep it simple and only invest in one fund, but successful investors usually compare funds and divide their monies over a number of them to reduce the risk. Have a look at the Heritage Portfolios page to see examples of effective portfolio diversification.
Investing in an ISA through Heritage will save you money. The funds that you choose to invest in will have an Initial Charge, somewhere between 0-5.5%, within which it has been costed to pay an average commission of 3% to financial advisers for introducing you to the investment house. The full Initial Charge is levied whether you apply to the provider direct or use a fund supermarket but not if you invest through Heritage. We rebate all the Initial Commission we receive on all the funds we offer, meaning more of your money is invested. Because we provide the investment houses with a lot of business each year, we have also been able to negotiate further discounts, which is why investing through Heritage will save you money - and we are always on the end of the phone if you need some help.
You can invest a single lump sum contribution into an ISA, you can set up a regular savings plan or a combination of the two. You may also withdraw from your ISA whenever you choose, meaning it is very flexible, what we call a liquid investment. The only stipulation the government put on your contributions/withdrawals is that the total contribution you make in any single tax year cannot exceed the yearly limit, i.e. £7,200. This means if you put £5,200 into an ISA and subsequently withdraw £4,000, the maximum contribution you can make in the same tax year is £2,000 (£5,200 initial investment and the £2,000 top-up = £7,200).
