When you hold an Investment ISA account, your money is invested in assets, like shares, bonds, or property and you don’t pay any capital gains tax or income tax on your returns. You can invest up to £20,000 in ISAs every tax year. So, if you have long-term goals, you could put your money in an Investment ISA (also called Stocks & Shares ISA) to fund your life projects and maybe even wealthify your future.
A place of your own
Want your own house? Knowing that the average house price in the UK is around £226,0711 and the typical deposit reaches 17%2 of the cost, you could need around £38,432 to secure a place to call your own. Let’s imagine you have an Investment ISA and invest £250 per month for 10 years into it. You could get approximately £40,266*. After paying the deposit for your house, you could keep the potential extra money in your ISA to grow your finances further and fund other projects, or you could use it to buy the furniture pieces of your dreams. In addition to holding an Investment ISA, if you’re under 40, you could also pay into a Lifetime ISA, specifically designed for those saving for a house, or later life. With a Lifetime ISA, you can save up to £4,0003 per tax year and you’re given a 25%3 bonus on your savings by the government, provided you meet the conditions.
* predicted value after 10 years assuming an average return of 5.62% with a medium risk Wealthify Investment ISA.
A dream trip
Whilst a week in Benidorm won’t necessarily require you to start saving years in advance, a more extravagant trip may call for longer-term planning. For example, if you and your partner decide to travel around the East coast of the US with a week in Washington DC, another 7-days in New York City, and a final week in Boston, you can expect to spend around £5,5004 for your 3-week adventure, including hotels and daily expenses but excluding flights. If you put £100 per month aside for 5 years in the same Investment ISA, you could end up with around £7,016*. And with that extra potential money, you could either upgrade the hotels you’re staying in or even add an extra stop to your holiday.
* predicted value after 5 years assuming an average return of 5.62% with a medium risk Wealthify Investment ISA.
Are you a budding entrepreneur? In the first year alone, new businesses can typically spend around £22,7565, including legal costs, accountants’ fees, and general administration, so before you begin this new chapter of your life, you need to make sure you have enough funds to cover the launch of your company. Let’s say you want to open your business in the next 7 years, you could contribute a monthly £350 to your Investment ISA and you could have an estimated £36,250*, enough to hopefully get your enterprise off the ground and giving your business a great head start to expand in the early years.
* predicted value after 7 years assuming an average return of 5.62% with a medium risk Wealthify Investment ISA.
Your children’s future
If you have children, you might want to start planning for their future now. For instance, you could help them pay for their university tuition fees. Let’s suppose tuition fees when your children enter university are the same as today namely £9,2506 a year, and £27,750 for a typical 3-year bachelor’s degree. You could make a first deposit of £200 and add £80 monthly to the same Investment ISA for 18 years and get around £29,888*. Why not keep the rest to Wealthify their wedding or help pay for an unforgettable honeymoon? Also, you could set up a Stocks & Shares Junior ISA in their name which allows you to invest up to £4,1287 per year in a tax-efficient way. Depending on your Junior ISA provider, your child will take control of their Junior ISA between the age of 16 and 18, but they can’t withdraw any money until they’re 18 when the account will automatically turn into an adult ISA.
* predicted value after 18 years assuming an average return of 5.62% with a medium risk Wealthify Investment ISA.
Putting your feet up
Although you might already have a pension pot in which you make monthly contributions, putting some extra money in an Investment ISA could help wealthify your later life. Also, when you plan for your retirement, it’s generally good to start sooner rather than later. If you start putting £75 per month in an Investment ISA when you’re 25, you could end up with an astonishing £138,821* at the age of 66, which could help you enjoy your retirement days with a good degree of financial comfort, maybe even in a sunny and warm country.
* predicted value after 41 years assuming an average return of 5.62% with a medium risk Wealthify Investment ISA.
The tax treatment depends on your individual circumstances and maybe subject to change in the future.
Figures in this blog are based on past performance and past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Investing is for everyone.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.