Investment ISAs are tax-efficient wrappers for long term investments. You may get back less than you pay in as your capital isn't guaranteed and charges may apply. Your personal circumstances will determine how much tax you pay on your investments and returns; tax laws may change.
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The most attractive aspect of choosing an ISA over any other type of savings account is that you are exempt from paying tax on any interest or profit you make.
ISAs themselves are split into two main types: cash and investment. If you want to squirrel your money away risk-free a Cash ISA - hopefully with a decent amount of interest - could be the best option.
On the other hand, Investment ISAs come with a certain amount of risk - but also the potential for greater gains.
There are two primary types of Investment ISAs which you can think about investing your hard-earned cash in - fund ISAs and self-select ISAs.
Fund ISAs let you put money into OEICs, Unit Trusts and Investment Trusts which manage your investments for you via the fund manager.
You still have the potential for major gains but you can only invest in funds which are tied to the account, and they'll charge a fee.
A self select stocks and shares ISA is a more advanced option. As well as the option to invest in selected funds they'll give you a share dealing account for buying stocks and shares; the big difference is it will be you deciding where to invest on a trade-by-trade basis.
With individual stocks and shares you'll get to keep 100% of whatever gains you make, the downside is that you don't benefit from a fund's expertise or protection.
Any funds you choose to invest in will still charge their fees as normal.
The amount you can invest will vary between ISA providers, with some allowing you to start with any amount and others requiring an initial minimum lump sum of up to £1,000 to open an account.
Once you have set one up you will have the option to invest monthly via a direct debit - how much depends on your budget.
The maximum you can invest in a single tax year is £15,240 (or less if you've paid into a Cash ISA).
The independence given by self select ISAs is great if you want control over where you put your money. However, the responsibility is also yours and you should think carefully about which self select ISA providers best suit your needs.
To work out what the best ISA providers are, you should think about what you want to invest in.
Different accounts offer different options, and depending on who you go with you'll be offered the chance to invest in a range of funds, shares, investment trusts and Exchange Traded Funds (ETFs).
It's because of this wide range of investment opportunities that you need to be confident you know what you're doing.
Once you've checked you can make the investments you want, compare account charges to find the best stocks and shares ISA provider.
When you make a self select ISA comparison you will need to consider the charges associated with each one.
Some companies charge a regular fee, which could be quarterly, for making investments, while others won't.
Generally you won't be charged for buying and selling funds, but the fund itself will still charge management fees.
However, some self select platforms offer to discount those fees on certain funds. Make sure those discounts will work for you.
When it comes to share dealing you probably will be charged per trade. Compare charges per ISA and also consider how many trades you're likely to make - prices are often based on the amount of deals you made the previous month (the more you made, the cheaper each one will be).
Make sure you compare each provider's terms carefully to know exactly how much you could be charged.
It can be tricky to know what to invest in with self select stocks and shares ISAs, which is why some companies provide tools to help you decide.
These can work out what your attitude to risk is and what you want to achieve, and therefore what you'd be better off investing in.
Self select ISA providers may also offer you the opportunity to invest in portfolios, based again on risk or a theme, such as emerging or more developed markets, which you can then tailor.
If you are considering taking on a self select stocks and shares ISA it's important to remember that these should be seen as long term options.
You should only commit if you can be confident you can invest your savings for a number of years and not need to access them in the meantime. If you are looking for short term savings options, a Cash ISA might still be the best bet for you.
If it's a longer term opportunity you're after, which offers the chance for great gains, fund or self select ISAs provide that possibility.
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