What are the different types of ISA?
Individual Savings Accounts (ISAs), allow you to save up to £20,000 per year (as at 2019/20) tax-free.
There is a range of different ISAs you can choose from - so be sure you understand their unique features before you decide which one best suits your requirements.
You can split the £20,000 allowance between ISAs to spread your funds over a range of investment opportunities. It is worth assessing them all as if you don’t use your £20,000 allowance it will not roll over to the following year.
Read on for an overview of the main types of ISA.
Cash ISAs are available to UK residents, aged 16 or over, and allow contributions of up to £20,000 per tax year (2019/20).
You can choose either an easy access or fixed-term account, which typically impacts the rate of return based on the length of commitment. Cash ISAs are FSCS protected, meaning you’re covered up to £85,000 of savings per individual, per financial institution.
Stocks and Shares ISA
A stocks & shares ISA is a tax-efficient investment account that lets you put money into a range of different investments, while offering the possibility of higher returns than cash ISAs, but only if you’re happy to take capital risk.
The range of investments can include individual shares, investment funds, trusts and government bonds or corporate bonds.
Innovative Finance ISA
Innovative Finance ISAs (IF-ISAs) are investments that allow consumers to lend and earn tax-free interest through a Peer to Peer lending platform. Innovative Finance ISAs pair up willing lenders (or investors) with individual and business borrowers through an easy-to-use online platform.
With an IF-ISA, you are loaning your money directly to borrowers across a range of project types in different industries. Each IF-ISA providers’ offering will differ so ensure you read their product terms before investing.
Kuflink is an example of a Peer to Peer platform where investors have the security of UK property-backed investments*. Our innovative finance ISA offers 1, 3 or 5-year terms, with interest of up to 7% per annum*. Kuflink pays IF-ISA interest annually and does not charge platform or investment fees.
*Capital is at risk and Kuflink is not protected by the FSCS. Past returns should not be used as a guide to future performance. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed.
You can use a Lifetime ISA to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. You can put in up to £4,000 each year until you’re 50.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. You can hold cash or stocks and shares in your Lifetime ISA or have a combination of both.
Top Tip: If you choose to pay in the maximum amount of £4,000, this will still leave £16,000 that can be paid into different types of ISA.
This account allows parents or any other friends or relatives to put up to £4,368 (for the tax year 2019/20) into an ISA for a child aged under 18. There is a choice of either cash or stocks and shares. The latter are riskier but generally outperform cash over the long-term. The allowance can be split between both types of investment.
Once the child reaches 18, a junior ISA automatically turns into a standard ISA and control of the account passes to them.
Any questions? Take a look at our ISA FAQs.
Transferring or moving your ISA
You can transfer Cash, Stocks and Shares ISAs and even IF-ISAs you currently hold with another provider. Previous year’s subscriptions don’t count towards your annual ISA allowance but current year subscriptions must be transferred in whole and will count towards your ISA allowance.
However, you cannot simply take the money out of one ISA to put into another, as your funds will lose their ISA status. You need to arrange a transfer with your ISA provider to ensure that the investments remain within the ISA wrapper.
To find out more about transferring, see here.
Choosing the Right ISA for your Investments
You can split your annual allowance of £20,000 between different types of ISA, allowing you to spread your investments, but how do you choose the right one?
You should first consider what it is you want to achieve, how long you are able to invest your money for and the level of risk you are willing to take.
Do your research, look at the reputation of the providers you are exploring and look at what they offer. Pick the provider that does what you need and want it to do.
Each type of ISA has risks, and you should have a clear understanding of how these investments work, and whether they provide the right opportunity for you. If in doubt, speak to a qualified financial advisor for further information.
If you’d like to talk to one of our Investor Relations team about the Kuflink Innovative Finance ISA, contact us here, and we’ll be happy to help.
Kuflink provides blogs for your general information only. Blogs do not constitute advice and should not be relied upon by you for making investment decisions. Products and services referred to will not be suitable for all investors and appropriate independent financial advice should always be sought where necessary.