Investing into ISAs makes financial sense

ISAs are individual savings accounts which are tax free savings/investments.

Tax free is not something we hear very often so, if we can make the most of these, we should. Interest rates are not great at the moment but interest without being taxed is better than losing some to HM Revenue and Customs.

Each year everyone can make investments into ISAs up to an annual limit. Any interest or dividends paid on these amounts are not taxable. Any profit on the growth of shares or stock investments are not taxable.

If you do not use your ISA allowance within the tax year it will be lost, so timing is very important to make sure you don’t lose you tax free allowance.

ISAs have been around for several years and the annual limit each year has increased slightly. However from July 1, there have been some major changes in ISAs.

These changes are effective now and we can all make full use of the new formats.

Up to April 5, 2014, the ISA limit was £11,520, this was split so you could invest a maximum of £5,760 as cash investment (similar to normal savings accounts) and the balance remaining could be invested commonly as shares. The cash part was limited to £5,760 but you could hold the whole £11,520 as investments.

From April 6, 2014, the limit had already been raised to £11,880 but then the budget changes increased this level significantly.

From the July 1, 2014, the limit for investment has been raised to £15,000. If you have already placed money into an ISA up to the £11,880 you can now top up to the £15,000.

In addition to increasing the total you can invest, the rules have been relaxed on the split between cash and share/stock investments, allowing you to hold all your ISAs as cash only, or split in any proportion you like.

ISAs are available for any UK resident aged over 16 for cash ISAs and aged over 18 for investment ISAs, and can be held in you own name or joint names.

Many high street and internet banks, even super markets, offer ISAs. Financial advisers can point you in the right direction and advise which ISAs would best fit your circumstances.