The 4 Types Of UK ISAs Available

ISAs offer tax advantages in the UK, shielding your money from income and capital gains tax once deposited. You can split your ISA allowance across different types like Stocks and Shares, Cash, Innovative Finance, and Lifetime ISAs. The tax year ends on April 5th, requiring action by then to utilise the ISA allowance. In total you can utilise any number of these strategies to save a maximum of £20,000 per year.

There’s 4 types of ISA available in the UK to adults:

• Cash ISAs provide risk-free, tax-free savings with various options like easy-access, notice, fixed-rate, and Help to Buy ISAs (no longer available for new applicants).

• Stocks & Shares ISAs allow tax-free investments into the stock market.

• Lifetime ISAs provide a 25% boost for savings toward a first home or retirement but have a £4,000 annual limit.

• Innovative Finance ISAs involve lending to borrowers with interest tax-free but carry risks of loss and lack protection for invested funds. Some providers will offer interest rates of in excess of 12% here.

In theory you could use of all these strategies to create a balanced portfolio. As a rule of thumb, when the potential interest rate goes up, so does the risk. It is also worth considering that the UK inflation rate (general rise in the cost of goods/services) is around the 4% mark. Hence utilising any of the above schemes at or below 4% will not see you grow your cash in real terms!