Wednesday, February 28, 2007

ISA Season

As the current financial year ends in April I have been attempting to sort out a few financial things. I am big on savings at the moment, its the only way I can see myself ever affording a house. I have found that the most effective way for me to save is to use my individual savings account privileges (ISA). Currently all UK citizens over 16 can save upto £7000 into an ISA account each year.

Even though they were intended as a simple savings vehicle, a lot of people get a bit confused about ISA's. The ISA is like a wrapper which can go round a range of accounts, anything from cash to bonds to stocks and shares can be held inside one. The government are a little fussy about how it works you can save upto £3000 in cash and an additional £4000 in equities. Alternatively you can pump the lot into equities.

There are two really great things about using ISA's. The first is that you don't have to pay tax like normal savings accounts. This means all the interest is paid gross. The second great reason is you never have to pay capital gains on the growth, though this is more geared towards stock market investments.

In my case save using both cash and equities. The equity part is in the form or Unit trust investments, I save money each month investing into the index tracker funds and various bond funds.

In short for taxpayers who save its pretty much a no brainer that using an ISA is highly effective way to save. So don&'t delay, act before April in order to get this years allowance.

Remember though I am not an accountant, so as ever don't take my advice do your own research ;)
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