Have you spent your ISA allowance for 2014-2015? According to Julie Hutchison, a consumer finance expert of Standard Life, last year, major changes were introduced which means that they have become more attractive and flexible to both savers and investors. ISA means Individual savings account, it is a tax-efficient way to invest or save. Now, about £470bn has been stashed from ISAs and they will celebrate their 16th year. This means that they have proven their popularity all over UK as an easy and simple way to save.
The major feature that makes ISAs popular is the tax advantages. It has two main types, the shares ISA and cash or stocks ISA, each of them perform different roles. With regards to cash ISA, you do not need to pay an income tax for every interest gained; this means that it works as a simple savings account while shares and stocks ISA do not need to pay capital gains tax in case of growth. Last year, ISAs had a huge makeover; so far, it was the biggest milestone in the last 16 years of its existence, according to Ms Hutchison. The good news is that they have become more flexible and allows a stash of up to £15,000 for the current tax year, at the same time, another £15,240 of the following tax year which is going to start on April 6.
However, even if ISAs have become more flexible and advantageous for many individuals, still, the people find it very difficult to save money. They even end up getting into so much debt by being so dependent with their credit cards and taking out loans from various lenders just to meet the needs of everyday life. One example is the Guarantor Loan; it is different from the guarantor lending market because it allows tenants to become guarantors instead of the typical home owners. They believe that a tenant who has been paying rent regularly for many years and has a good credit record is not different from a homeowner; this is the reason why he is allowed to become a guarantor. Last year, their maximum loanable amount was increased to £5,000 from £3,000 and the APR was reduced tremendously to 59.9% from 79.9%.
Even if the rate of people taking out a loan is increasing, the government is making ways and programs to promote savings. One of them is the new rules of ISA, the government has introduced a new way to transfer between stocks and shares and cash, and it was a big change implemented last year. This means that anyone can own a cash ISA and they can decide later whether to transfer or not to shares and stocks ISA. This is a good development because an individual is not stuck with the original ISA since it is now flexible by moving it both ways.