Something Special For You: BFFs for Life

How to Keep Your Savings Tax Free Year After Year

14:06 05 March 2013

There is an ancient proverb that says “A fool and his money are soon parted”. Somehow I get the feeling they were talking about me. But that’s a whole different article! ISAs (individual savings accounts) can change that. Now you and your money can be best friends for life!

 

You may ask “What’s so special about an ISA?” Isn’t it just another savings account? Well, yes and no. The difference between a regular savings account and an ISA is that the ISA is tax free. So if you keep the money in the ISA, it stays tax free year after year.There are many different ISAs to choose from, so it’s good to know what your options are. 

 

The allowance for 2012 to 2013 has been increased to £11,280, which is great news. This means that you can invest a total of £11,280 for the year. Each year you start with a fresh allowance. Only £5,640 can be invested as cash. Your ISA gains tax free interest as long as your money stays in the account. 

 

Although your ISA can be set up with easy access for withdrawal, it’s most productive when you allow your money to stay and grow. There’s great potential for growth if you invest in stocks and shares that produce positive dividends. Of course that also means there’s equal potential for loss if stocks don’t perform well. 

 

As a retirement investment tool, ISA are perfect for long term savings.  Since retirement accounts are growth accounts as opposed to short term, the longer you allow your money to stay and grow, the bigger your potential return. Year after year you will be adding more into the account tax free.  With interest and stock dividends, by the time you retire you could potentially have a nice amount saved up!