Other ISAs: Cash, Lifetime, Help To Buy and Innovative Finance


 

ISAs have been breeding like rabbits – there are more than ever to choose between. Here's some help to get you started. 

Help to Buy versus Lifetime ISA – Audio Guide


Cash ISAs

Cash ISAs are a way of accumulating cash savings and keeping them quarantined from the need to pay any tax on the interest. 

They work just like a savings account. The interest rate offered will vary depending on whether it's for a fixed-term or easy access; and whether it's online only or offers branch support. 

TIP: If you are saving for kids, don't forget to look at cash Junior ISAs as these rates are often better

Our two-page Guide to Cash ISAs tells you in more detail if a Cash ISA is right for you.

 

Tax-free savings tubs

The Benefits

We think cash ISAs have lost their shine a bit. Basic-rate taxpayers now get a total of £1,000 of tax-free interest every year. Wherever that comes from or whatever type of account you have. Higher rate taxpayers get a total of £500. So – unless you have tens of thousands of pounds lying about – go for the best rates you can find? Which are often in savings accounts, not ISAs.


 

Some leading rates as of October 2017

  • Charter Savings Bank has a 1.4% one-year fixed-rate ISA
  • Charter Savings Bank has a 1.3% easy access cash ISA
  • The Coventry has a 3.25% Junior Cash ISA

Cash rates move all the time. Check online for the latest deals.


Lifetime ISA

Like the more traditional ISA, the Lifetime ISA offers a tax-free way to save – but with an appealing extra. You can save up to £4,000 a year and get a 25% top-up from the Government. This account has been designed to be used either for the purchase of a first home OR for retirement. 

You can choose to save into either cash or stocks and shares. But you can't be over 40 if you want to open one... Bah! As if wrinkle-free youth wasn't enough! 

TIP: If you're not sure and might change your mind about buying, be careful. Nasty exit fees apply. 

 

4 quick facts

  • You must be 18-39 to open one (can pay in till you're 50)
  • Save up to £4,000 a year for a free £1,000 from the Government
  • Must be for a first home OR retirement
  • You get spanked with withdrawal charges if you take the money out for another reason

Stamp Duty Changes Summarised

First-time buyers will be exempt from stamp duty on any property up to £300,000. If you are buying a property worth up to £500,000, you will pay stamp duty on the chunk which is over £300,000 only.

Gimme the facts

The Benefits

The obvious benefit is up to £32,000 free cash from the Government!

These are great if you're convinced that you want to buy a house OR that you can set the money aside until retirement. For first-time buyers, the money is provided on exchange, not completion (unlike the Help to Buy ISA). You also get the chance to invest it into the stock market and not just in cash – good if your saving horizon is 5 years +.

 


 

Where can I get one?

At the moment you are not spoilt for choice. There are four places you can get a stocks and shares LISA: AJ Bell Youinvest, Hargreaves Lansdown, Nutmeg and The Share Centre. AJ Bell Youinvest and Hargreaves Lansdown both offer extensive investment choice. Nutmeg and The Share Centre are better for beginners.

Skipton is currently the only place you can get a cash Lifetime ISA.

 


 

Help-to-Buy ISA or Lifetime ISA?

Stuck between a Help-to-Buy or a Lifetime ISA? You're not alone! We have a two-page guide in plain English which summarises the differences.

 

Help!! Show me the Guide.

Help To Buy ISAs

Help to Buy ISAs are designed for those buying their first home. It is a cash savings scheme, where the government will boost your savings by 25% when you complete the deal. (This is capped before you get too excited...)

You can save up to £1,200 in the first month, and then £200 per month. The Government will stick in £1 for every £4 you save, up to £3,000.

The definition of first-time buyer is strict – it is someone who has never owned an interest in a property, either in or outside of the UK. They are an individual product, so if two first time buyers purchasing a house together save up £12,000 each they get £3,000 each from the Government and have a total of £30,000.

 


 

Our one-page factsheet has some more helpful points in case you're stuck. 

 

Get me that flat!

The Benefits

They are simple. You get good interest rates. And top-ups from the powers that be. But these Government bonuses are limited to £3,000. 

  • Cash savings accounts to fund a first house of up to £450k in London and £250k elsewhere
  • Pay in £12,000 for the maximum £3,000 free from the Government
  • No withdrawal penalties if you change your mind – you just won't get the bonus

 


 

Where can I get one?

  • Barclays – interest rates are currently 2.25%
  • Nationwide – interest rates are currently 2%
  • Virgin Money – interest rates are currently 2%
  • All rates are correct as of October 2017

Innovative Finance ISA

There is yet one more sort of ISA. The Innovative Finance ISA. 

This is basically picking up on the crowdfunding idea. Start-ups raise money from other lenders, bypassing the banks. OK so there are success stories like Brewdog. But for every craft beer entrepreneur, there are many more early-stage firms destined to crash and burn. 

In this ISA, you invest in a big combined pool of these sorts of firms. Which spreads the risk. 

However although we know we'll be shouted at by people who make these things, we still think they're not mainstream and a bit risky. If you want to have a look Zopa is the most established player. 

Guide to Innovative Finance ISAs

A new option for potentially higher rates... but with higher risks.

Our three-page guide covers everything from the basics, where you can invest, and what the benefits are. 

 

What exactly is it?