There are some common misconceptions about ISAs that we thought we would clear up for you:
1. You can only pay into one ISA per year
You can, in fact, pay into as many ISAs as you like, providing you only pay money into one from each type! So you can only pay into one Cash ISA, one Stocks & Shares ISA, one Lifetime ISA (LISA), etc. These can be with different providers but you cannot have more than one of each type.
2. ISAs don’t give good returns
Good returns are not based on whether your account is an ISA – if you have a cash ISA and Interest Rates, in general, are low, then you will get a lower return. The returns in Stocks & Shares ISAs are based on the performance of the Markets, and LISAs offer a bonus contribution and come as Cash or Stocks & Shares. So there are a variety of performance possibilities – which you choose depends on what is most suitable for you.
3. Wait to pay into your ISA until the end of the tax year
While this may be a reasonable tactic if you want to make sure you can afford to contribute to your ISA in the current Tax Year, it isn’t always best to wait. By adding funds early to your ISA, be it Cash or Stocks & Shares, you have more time to earn interest or generate returns. You could also consider paying into an ISA monthly if that is more suitable, and with Stocks & Shares ISAs this can take advantage of the movement of the markets and help smooth returns.
4. You can’t replace any withdrawn funds
The rules were changed in 2016 so that you can take money from your ISA and replace it … providing you do so within the same Tax Year! Be warned, not all providers offer this, so make sure you check before you contribute or withdraw.
5. You can’t transfer between different types of ISA
Good news, you can transfer between different types of ISA and still keep your account as an ISA! If you have a Stocks & Shares ISA but want to transfer this into a Sash one, or vice versa, then this is possible – just speak to your provider. This has the benefit of retaining the valuable ISA status of your whole account as you don’t have to withdraw the account to move it.
6. You must be an experienced investor to invest in a Stocks & Shares ISA
You don’t have to be experienced to invest in a Stocks & Shares ISA, but it does help to have some knowledge of how investing works. Your best bet is to use an experienced Financial Adviser (such as us!) to manage these kinds of accounts for you.
Redwood is one of the Souths’ leading Pensions, Investments, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning and Probate, we can advise on any situation. Join us at one of our Free Public Information Seminars: Book online Book Me A Place!, Call us on 01489877 547 or Email info@redwoodfinancial.co.uk to book a FREE Initial Meeting with us to review your financial planning needs.
