This may be partly because as a nation we find it difficult to talk about anything other than the weather.
Bad jokes aside, ISAs could be worth the conversation. I will briefly list why below, and you can pat yourself on the back if you are still awake by the end of this post.
The main benefit of an ISA is that any money that you invest through it will not be taxed on any income or capital gains that you may subsequently make through your investments.
So let’s say that with money invested through an ISA you bought some shares and were fortunate enough to see them go up 100x in value. Well in this (somewhat unrealistic) example, you wouldn’t have to pay anything to the tax-man.
Alternatively, if the company you bought shares in was nice enough to pay you a dividend, then again the tax-man wouldn’t get a penny of this income.
Before you get too excited, however, there are a few limits to ISAs. After all Mr Tax-man does need a few pennies to rub together.
The main limit is the fact that you can’t contribute more than £15,000 per year to an ISA.
The other limit is that any money you contribute has in most cases already been taxed. This is because unlike with a pension pot, you can only add take-home pay into an ISA. For most people. take-home pay has already had tax deducted from it.
There are exceptions to this rule (eg. if you add inherited money into an ISA) but I don’t want to bore you further so I’ll stop there.
To sum up, ISAs are a good way to allocate any cash you have left over at the end of the year that you want to invest after your pension contributions.
The words expressed in this article are my opinion and are not to be interpreted as financial advice.
Written by: Harold Schick