Use your ISA allowances
Feb 14th, 2007 by complex001
Why are not more people taking advantage of Individual Savings Accounts (ISA’s)? You are allowed to contribute up to £7,000 per annum per person into an ISA and all the profits on these are tax-free.
If you put the money into a unit trust you could end up paying Capital Gains Tax (CGT) on the profits when you sell and Income Tax on the dividends that are paid out at regular intervals. If you but the money into a bank or building society account you will pay tax on all the profits. Also as these are interest bearing accounts the level of interest you get will be very low, although as they are not stock market linked you are not going to see your money go down in value. If that is of concern to you then put your money into a cash ISA which is effectively a building society account ISA, so there is no tax to pay.
Investment bonds are another alternative as they are free of personal liability to Capital Gains Tax and are also free of basic rate income tax. They are however subject to higher rate income tax if you are either a higher rate taxpayer or the profits take you into higher rate tax.
As you can see for the majority of investors ISA’s have major advantages over most other investments.