You may already have a Cash ISA with your bank.
But did you know that you can hold all kinds of assets in an ISA? And pay no taxes on what you earn?
The potential here is enormous, because some assets – like stocks – could make you far higher sums over the long-term.
When you own a stock, you own a small piece of a business. A real, cash-producing asset that’s working for you day after day.
Hold it in a Stocks & Shares ISA. You can collect dividend payments tax free.
Or, if your shares rise in value, you can sell them and pay zero tax on capital gains.
How risky are stocks?
You might be averse to stocks because they’re “risky.”
Your shares can fall in value.
The business you’re holding could take a financial hit. Or even go bankrupt and disappear.
These are all valid fears.
However, you can help mitigate these risks by choosing strong companies with steady revenues.
Good examples are utility companies.
No matter what the economy’s doing, people need heat, electricity and water. So utility revenues are usually less vulnerable to recessions and market swings.
What’s more, their dividend yields are often generous. 4-6% is typical, though of course not guaranteed.
These payments alone are far higher than any interest you’d get in a Cash ISA.
Don’t forget, cash also has risks
In fact, if you stuff cash under a mattress, you are virtually guaranteed to lose purchasing power.
Inflation is always eroding the value of your cash. Nowadays, it’s difficult to beat inflation with the interest from any savings account.
And today’s inflation is relatively low!
If you were around in the 1970s, you’ll know that inflation can really rip higher.
In 1975, inflation got as high as 24%. By 1980, the pound was worth almost 4 times less.
When inflation soars, cash and bonds are the absolute worst things to be holding. That’s why using a Stocks & Shares ISA to diversify your savings is generally a good idea.
Generous £20,000 ISA allowance each tax year
Right now, you can add up to £20,000 per year to your ISA.
This allowance is very generous. Most ordinary savers needn’t pay any tax on their investments.
You don’t have to report your ISA holdings to HMRC. This is a huge hidden benefit. As anyone with assets knows, filing your taxes can be almost as painful as paying them.
Your money isn’t tied up, either.
Virtually all stocks available in an ISA have a ready market of buyers and sellers. With a few clicks, your shares can be sold in seconds. The cash appears in your brokerage account, ready to withdraw.
Want to add more than £20,000 this year?
If so, you’ve all the more reason to act now.
The cut-off date for ISA deposits is midnight, April 5.
Suppose you had £40,000 to invest, and hadn’t used an ISA this year. You could add £20,000 to your Stocks & Shares ISA now. Then, from April 6, add the other £20,000.