What’s the catch with ISA accounts?

📊 Investing
1

Hey guys!

As you might know ISA accounts are only for those living in the UK. Quite appealing if you ask me about them. No tax you get to keep your profits to yourself (to a certain limit). However, I asked Google (not ChatGPT yet) about the catch with them as you might wonder it is too good to be true. The response was not shocking but interesting. You can only use the money to buy your first home or wait until you are 60 to spend it on whatever? How accurate is this information?

2

Not so. You’re referring to Lifetime ISAs which isn’t what is offered here.

Every other type (unless fixed) you can deposit (up to £20k per year) and withdraw (no limit) at any time.

Also not aware of any limit on profits in an ISA, the whole point is that it is a “wrapper” so nothing in there is taxed.

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3

He is appauled that you have to be a UK Citizen to enjoy one.

That’s the only catch I see but I live here.

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4

This is only for LISA (Lifetime ISA).

There are 4 types of ISAs:

  • cash ISA: You deposit money, and your interest is tax-free, no catch here.
  • Stocks and Shares ISA: you deposit money, and can buy and sell shares as you wish and every gain is tax-free, no catch here too. It is what Trading212 offers.
  • Lifetime ISA (LISA): This is where you can deposit a max £4k a year. You have to be under 40 to open one and will get a 25% bonus from the government on your deposit until you are 50 (max £1k a year). The catch you were talking about is referred only for this type of ISA, where you can only withdraw only if you are buying your FIRST home or are over 60 or dying soon (less than 12 months to live).
  • innovative finance ISA: I have no idea what it is.

Every year you can DEPOSIT up to £20k (the amount might change) and it’s across all your accounts.

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5

It depends on the type of isa what you can add.

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6

Except for LISA (max £4k), everything else is up to £20k as far as I know… Am I missing something?

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7

For investing, for example, in P2P Lending.

More info about ISAs in here:

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8

Thank you for sharing your knowledge

This is Chat GPT response

As far as I am aware, there is no catch with investing in shares or stocks through an ISA in the UK. The tax benefits associated with an ISA are a legitimate incentive provided by the UK government to encourage individuals to save and invest. As with any investment, there is always some level of risk involved, and it’s important to do your research and understand the risks and potential rewards before making any investment decisions. It’s also important to note that tax laws and regulations can change over time, so it’s a good idea to stay informed about any updates or changes that may affect your investments.

I guess as long as the government is turning a blind eye to it we are good

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Not even a blind eye. They’ve been lifting and improving ISAs for a considerable period of time.

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That doesn’t mean they won’t touch it when times are tough money has to come from somewhere

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The taxation is part of the political risk, every investment has. As well all other aspects of economics and society.

Some of the most relevant risks:

  • political risk (taxation risk, regulation risk, legislation risk)
  • economic risk (market risk, liquidity risk, interest rate risk, credit/default risk, inflation risk)
  • environment risk (weather risk, health risk)
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12

To put it mildly that’s unlikely. There is political risk in doing so… obviously.
The most likely is to limit it to a maximum total payment.
Or and reduce the amount you can pay in.

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13

The UK is so very xenophobic. Outrageous!!

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14

Lets short the UK market to the ground, money to be made :rofl:

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