What’s the Difference Between an ISA and a NISA?

by Brook J. i love to write

Do you have a savings account? If so, have you ever stopped to think about whether your savings could be working harder for you? Chances are, they could be, and an ISA could be the solution. Also known as an Individual Savings Account, you may have heard friends and family talking about their ISAs. But what exactly is an ISA and what is the difference between an ISA and a NISA? We’re here to straighten things out with some tips on wealth management and savings.

What is an ISA?

An ISA, or Individual Savings Account, is a tax efficient way to save your money (or invest it). You’ll normally pay tax on any interest earned on your standard savings account, but with an ISA, any interest you earn is yours to keep, tax free. Sounds great, right?

What’s the Difference Between an ISA and a NISA?

If you opened your ISA after 2014, chances are you already have a NISA, or New Individual Savings Account. NISAs were introduced in 2014 and were designed to give you a better return on your investment, as well as greater flexibility when it comes to saving.

Back in 2014, the ISA allowance (the amount you can invest each tax year) was £11,880, but only half this amount could be invested in cash. By 1^st July 2014, this amount had risen to £115,000 and with the introduction of NISAs, it became possible to split the allowance however you liked between a cash NISA and a stocks and shares NISA.

Flexibility for Your Savings

A NISA and Xero Cloud Accounting also gives you the flexibility to transfer between your stocks and shares NISA and cash NISA – previously it was only possible to transfer funds from your cash ISA to your stocks and shares ISA. Any interest on cash held in a stocks and shares NISA is completed tax free. Basically a NISA lets you save more money, quicker.

Is a NISA Right for You?

If you have a lump sum of money to save or invest, if you’re planning on saving on a regular basis then a NISA is a great idea. With the NISA allowance for 2018/19 set at £20,000, you have the choice of investing or saving up to this amount in either a cash NISA, a stocks and shares NISA or a combination of the two.

Because financial planning can sometimes be complicated, we’re here to help. To find out more about NISAs or wealth management and savings, just get in touch with us.