Recent research from the Association of Investment Companies suggests that 78% of investors plan to make use of their ISA allowance this year. 40% plan to use only the shares element , representing a 1% rise since last year, while just over a quarter plan to use both their cash ISA and investment ISA allowance, again representing a 1% increase on the previous year.
While the figures for investment ISAs are looking quite healthy, the number of investors using only cash ISAs has been steadily decreasing over the last few years, a change which is thought to be due to the current low levels of interest available on savings accounts. Only 12% plan to use their cash allowance alone, representing a drop from 14% last year and 18% in 2011.
What is an investment ISA?
Unlike a cash ISA - which is a straightforward tax-free savings account - a stocks and shares ISA allows you to invest money up to a certain amount without paying tax. This runs from 6th April each year, and for 2012/13 the full individual ISA allowance has been set by at £11,280. From 6th April 2013, this allowance will increase to £11,520 - a 2.1% rise on the previous year.
A stocks and shares ISA allows you invest your tax-free allowance while only paying 10% tax on any investment income you make. This can add up to a substantial saving when you consider that, on dividends paid on a non-ISA investment, an additional rate taxpayer would have to part with 42.5% in tax.
Why use your ISA allowance?
Whether you choose to use your cash ISA allowance, investment ISA allowance, or both, it’s a good idea to stash away as much as you can in order to take advantage of the tax-efficient benefits on offer. Use the tables below to compare some of the latest ISA deals.
No news, feature or comment should be seen as a personal recommendation to invest. If you are in any doubt as to the suitability of a particular investment you should seek independent financial advice.
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