ISA’s and Investment Bonds
With an ISA you can invest your entire ISA allocation of £ 15,240 tax free in stocks and ISA shares. You can invest a lump sum or a regular contribution from as little as £ 500 or £ 50 per month, respectively.
There are no personal taxes on the income or gains your investment makes, however, if you pass away, your ISA will be subject to inheritance tax, so it would be wise to transfer it to your intended beneficiary in advance to avoid IHT. You do not need to include ISA holdings on your tax return. There are no initial charges or withdrawal fees. However, stock trading fees and other fees may apply.
An investment bond is simply a tax wrap, like an ISA but with different tax laws.
After investing in an ISA, it could be the next step and is designed for a medium to long-term investment, typically five years or more. Through an investment bond, you buy shares in a fund or a range of funds depending on your risk perspective. The funds can be a combination of cash, fixed interest securities such as corporate bonds or gilts (government bonds), commercial property such as warehouses, offices, commercial premises, and stocks.
By investing in a land investment bond, you are pooling your investment with other investors, allowing you to access a greater variety of investments. This investment spread helps you diversify the overall risk of your investment. Each fund will aim to let you know how and where the money is invested. for example, a UK equity fund will focus solely on the UK stock market.
Funds can have different management styles, such as smaller companies, total return investing, and fund of funds portfolios. It is important to consult your financial advisor and tax investor before making an investment decision. There is no personal income tax to pay in the event that the value of a bond increases. The fund itself pays some taxes as income or capital growth is achieved and the rate it pays may be less than the base rate of 20%. As an investor, you may have to pay some tax when you cash out your bond.
Bonuses can be a great way to provide a one-time, monthly, quarterly, or annual income payment. You can withdraw up to 5% of the amount invested annually without having to declare it on your self-assessment tax return. The allocation is cumulative, so the unused amounts Advanced Payment Bond can be used in later years, for example, if you do not withdraw anything in year 1, you can withdraw 10% in year 2 and so on.
Each fund has its own risks detailed in the key information section for the individual investor and there is also a general guide to the investment document. It would be advisable to read both and consult an advisor before selecting a fund. Remember the value of your investment and any income derived from it may increase or decrease and is not guaranteed.