The business schools reward complex behavior more than simple behavior, but simple behavior is more effective.
An Individual Savings Account (ISA) is a financial product available to residents in the United Kingdom. It is designed for the purpose of investment and savings with a favourable tax status. Money is contributed from after tax income and not subjected to income tax or capital gains tax within the ISA or upon withdrawal. Cash and a broad range of investments can be held and there is no restriction on when or how much money can be withdrawn. It is not a pension product but can be a useful complement to a pension for retirement income, particularly when it is desirable to draw down capital at a faster rate than permitted in a pension.
Cash ISA (typically offered by banks)
A cash deposit that is similar to any other ordinary savings account, apart from the tax-free status.
Stocks and Shares ISA (typically offered by stockbrokers)
The money is invested in ‘qualifying investments’, which include:
- UCITS authorised funds like unit trusts and ETFs as well as investment trusts
- Shares listed on one of the many recognised stock exchanges, including AIM
- Fixed interest securities such as treasuries, corporate bonds, debentures and Eurobonds
- Depository interests such as CDIs or ADRs, provided there is an underlying listing on a recognised stock exchange
The ISA Allowance for the 2021/2022 tax year is £20,000. Confirmation of the current subscription limit can be found on the HM Revenue & Custom’s website www.hmrc.gov.uk/isa.