More than 19 million people in the UK save money in ISAs – many of them pensioners, and many of them use stocks and shares ISAs. This can be a good way to limit your tax liabilities on investments, as you are not required to pay any tax on the interest or dividends you earn through a shares ISA.
This is in contrast to if you were to invest in stocks and shares outside an ISA; pensioners could potentially be hit hard by both income tax and capital gains tax if they were to earn significant dividends on their investment. A share ISA helps to stop this from happening; in the 2011-2012 tax year, you are able to save up to £10680 in one of these investment ISAs.
This investment can be entirely made up of stocks and shares or you can split it equally between a cash ISA and shares. One thing to keep in mind with an investment ISA is that its performance is dependent on the performance of the stock exchange: if the markets are volatile then your ISA investment is also likely to be invested. However, the markets are more likely to rise in the long term and so if you are able to make a commitment for a few years or more, you could potentially get very good, tax-free returns on your money.
This can be especially useful for pensioners who rely on savings interest to live on, but it also means it is worth doing some research into the best stocks and shares ISAs available. This will help to give your investment the best chance of success and means that your money will be well-managed and invested in carefully-selected companies listed on the stock exchange. With any luck, your investment should be more than worth it – and the tax benefits will certainly help.
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