Invest in stocks and shares this new tax year | Money And Investing

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April 4, 2012 | Leave a Comment

A new tax year begins on 6^th April 2012 and this means that now is a good time to start thinking about the investments you would like to make for the year ahead. For most people, this means thinking about the ISA ? or individual savings account, to give it its full name.

As most people already know, there are two main types of ISA: the cash ISA and investment ISA. One of the main benefits of both these types is that ISAs are beneficial for your tax allowance. This is because you do not have to pay any tax on the interest or dividends you earn from your ISA. The idea behind this is to help encourage saving.

ISAs also have a savings limit each year, which means that if you want to save a larger amount of money, you will need to consider alternative products as well as thinking carefully about which of your investments to have in your ISA. For cash ISAs, the allowance for the 2012/2013 tax year is ?5640. The investment ISA allowance is double this at ?11280.

This means that you can essentially save up to half of your annual ISA allowance in a cash ISA, but if you want to save more than ?5640 you will definitely need an investment ISA. Many people just have the cash version, but when you consider that there is a potential for your investments to reap good returns, it makes sense to consider the investment ISA option, particularly as this allows you to save more.

If you have an investment ISA, you?ll still be able to save part in cash form as long as it doesn?t exceed 50% of the total. For example, you cut put ?1000 in cash and still save ?10280 in the form of investments. The most common investment ISA is the share ISA. This invests in the stock market, which means that the performance of your product is dependent on how well your investments do. Therefore, there is a risk involved with the stocks and shares ISA, but there are risks attached to every investment.

The good news is that the ISA allowance has risen since the previous tax year, where the allowance for a stocks and shares ISA was ?10680. ISAs have been around for quite a few years now, but it was only in 2010 that the annual allowance was bought into line with inflation. For the first couple of years, this meant that the annual ISA limit went up in line with the RPI index. This year, however, it has gone up in line with the slightly lower CPI index. It?s still an increase, though, so people looking to make regular investments will be able to invest more than in the previous tax year.

Overall, while there is a risk involved in investing in the best stocks and shares ISA, it is still considered one of the best investment products for most people as it offers tax-free returns and the ability to save part of your money as cash if you want to. There are quite a lot of ISAs on the market, so shop around to make sure you get the best one.

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