The Benefits Of Using A Stocks And Shares Isa

Many people know that they can put their savings in a Cash ISA and benefit from it being tax-free

. Less people would probably think about investing their savings in a Stocks and Shares ISA, and yet there are a number of reasons why doing this would be beneficial to you and your savings. The main difference between a Cash ISA and a Stocks and Shares ISA (SSISA) is in the name Cash ISAs are for storing lump sums of money while SSISAs are where you can invest your savings in the stocks and shares of companies.

The main benefit of a Stocks and Shares ISA is the tax-free nature of the investment. Typically investors would expect to pay 20% income tax (sometimes even as high as 50%) on any profit that their investments make. Also if your investments bring in more than 11,280 when they are sold you will have to pay capital gains tax on the profits. With a Stocks and Shares ISA none of this applies. You will not have to pay any capital gains tax or income tax on any profits you make on your investments. A Cash ISA is also tax free on any interest you receive.

Another benefit that may appeal to people looking for places to put their savings is that the limit on the amount you can put into a SSISA is higher than a Cash ISA. The current limit that you can put into a Cash ISA is 5,640 while the limit for a Stocks and Shares ISA is double that at 11,280. This is beneficial as not only can you invest more of your savings but there is the possibility of a higher profit from your investments as the more you invest the more you can potentially earn.

Stocks and Shares ISAs are also more advantageous in the long term. Many financial experts have claimed that SSISAs, in many cases, outperform Cash ISAs in terms of profits and returns. With a Cash ISA you are likely to receive interest of 1% to 6%; this will suit many people if they find the right rate and provider for them. However, with a SSISA, some experts claim if you invest wisely you could be looking at gains of anywhere from 10% to 20%. You do have to think about your investments carefully and make sure you keep monitoring them as though Stocks and Shares ISAs may bring higher returns; they also have an element of risk.

With a SSISA you can have a more flexible approach towards your savings and the investments you are putting them into. You can choose to pick out your own investments if you feel you have a good sense of which will be profitable. However, if you have no experience of what to choose you can opt for a discretionary portfolio where an investment manager will use their expertise and experience to choose investments and manage them for you. If you would like to go one step further you could choose an Investment Trust. An Investment Trust buys shares in a number of different companies, you then by shares in the Investment Trust. A similar alternative is a Unit Trust where you can buy a unit of pooled shares. There are number of different ways to use a Stocks and Shares ISA as they can be particularly flexible to your needs.

Stocks and Shares ISAs can be particularly advantageous for a number of reasons. They are flexible, more likely to have higher gains than a normal Cash ISA, have a higher limit on the amount you are allowed to put in and are tax free. You can also withdraw your savings from a SSISA at any point you do not have to wait until a specific time before you can gain access to them. If you are looking somewhere to put your savings, make sure to consider all the options before you make a decision.

by: Izzy Evans

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