What's up you guys, sasha here in this video, i'm going to explain everything there is to know about ice accounts? What are the different types of iso accounts? How do they work? What are they good for and there's going to be a huge amount of detail because there's going to be so much information, i'm going to try to be as concise as possible. But if you're interested in re-watching any parts of jumping around i'm going to put timestamps to specific sections within this video in the description below now, just a really brief disclaimer before we get started, i am not a financial advisor. I can't provide financial advice and if you do need financial advice, you will need to go and seek the help of a suitably qualified professional. Now that's out of the way.

Let me really quickly explain what is an isa account and a nice account is a type of savings or investment account where you can go and put your money and all the gains that you then get from that account in terms of money that you earn on The money you've put in will be free from uk tax and, specifically they'll be free from uk income tax, uk dividend tax and uk capital gains tax. You can put a maximum of 20 000 pounds per year into your isa accounts and that can be put into any number of iso accounts subject to some rules i'm going to get to in just a second that is the total cap across all the different accounts. You can put 20 000 pounds into just one or you can spread it between the different types. Remember that the government does adjust the maximum amount and has been lower in previous years, so there is a likelihood that it will go up at some point in the future, but it can also theoretically go down, and typically these are set for financial years.

So, starting from the 6th of april up to the 5th of april the following year, make sure you go and look out for any changes that are coming in to make sure that you make the most out of whatever allowances are allowed in each single year. One really important rule to remember is that you can only put money into one of any one particular kind of an isa account. So that means, if you, for example, have a cash isa account and a stocks and shares isa account. You can go and put money into each and that's okay, but if you have two different stocks and shares isa accounts, you can only deposit money into one of them during the length of any one financial year.

You don't have to close the other one down. You can have as many as you like you can open 20 different ones if you care that much, but you can only deposit money into one of them in any one year. The other important point is that isa accounts can be either flexible or inflexible, and this is a really important point that most people seem to ignore when they talk about isis. Flexible accounts allow you to withdraw money from your isa for whatever need during the financial year, but as long as you then put the money back into that same isa account during the course of that financial year.

You get to lose nothing in terms of your overall allowance, however. Inflexible isa accounts mean that whenever you withdraw the money, your allowance, essentially for that year, is lost. So, for example, let's say you have an isa account and you deposited ten thousand pounds into it. If you then withdraw two thousand pounds from an inflexible isa account, you can then put another ten thousand pounds maximum into that iso during that year or any other iso for that matter.

So the total amount that you will have invested in that tax year will only be eighteen thousand because of that two thousand pounds that you withdrawn to open a cash iso account. You have to be at least 16 in the uk, but for all the other types of isa accounts you have to be 18 and that means for lisa for stocks and shares or for the innovative finance isa accounts. You have to be at least 18 in order to be able to deposit money into them. Now there are four different types of isa accounts that are available in the uk in 2021.

There were some other types available in the past, for example, to help to buy isa, but those don't exist anymore. You can't go and open them, so i'm not going to cover them in this video. Let's quickly cover them one by one and i'll, tell you all the things that you need to know about how they work and some of the interesting points about each first, let's come on the most common, the best known and the most straightforward of them, which is The cash iso account - and i say straightforward, the name is slightly confusing because it is actually a savings account. It just means that you can go and put your money into a savings account and you don't have to pay any income tax on the interest that you get paid in that savings account.

You can invest up to the full 20 000 pounds into a cash isa. Account or any part of it if you're wanting to invest in other things as well, but the returns are going to be quite low. Typically, the best returns that you can get today on cash iso accounts. If you go and look on, the open market is about 0.6 percent, that's less than inflation, so that's not the best way, probably for most people to go and invest your money, because you're essentially still losing money, even though it's invested in one of these iso accounts.

Next up is the stocks and shares iso account. This is one where you can go and invest the money in the stock markets, and this is quite exciting because it offers a lot more flexibility than some of the other accounts. Now the different types of stocks and shares isis are not the same. They offer quite different things.

Some, for example, like free trade or trading 212, offer you the ability to invest your money in a huge number of different things: thousands of different types of stocks, etfs bonds, various kinds of funds, but others, for example, nutmeg or wealthify limit you to a very small Number of proprietary funds, where those funds make the decisions on investments on your behalf, and you can just choose between the small number of funds as your only options, those types of firms do not officially provide financial advice. Yet your money is looked after by a team of qualified investment managers. Whatever that may be again, you can invest up to the full 20 000 pounds into a stocks and shares isis. There are no restrictions and the beauty of it is some of the newer types of accounts, some of the ones that are disrupting the market are either very cheap or free.

In the case of trading, someone to the isa account is completely free. There are no fees of any kind whatsoever other than to deposit via credit card or debit card, although you can still deposit for free via a bank transfer. So generally speaking for most people, the account will be free and better than free. If you do choose to go and set up a trading 212 iso account or just a regular investing account if you go and use my link in the description below you'll be able to go and get yourself a free share.

Once you sign up and put in the minimum deposit and the minimum deposit is pretty much nothing. So if you want to go and do that, if you're interested in trying it out and seeing what it looks like you can go in yourself, a free stock for the privilege of giving it a go now, these types of investment accounts mean that you don't have To pay any dividend, tax or capital gains tax, on the gains that you get from the investments in various stock shares, etfs and whatever else you want to put your money into. But that doesn't mean you get to pay no tax at all, and this is crucial to understand. You still have to pay some taxes in particular the most common one you're going to have to pay is the us dividend withholding tax.

So that means that whenever u.s companies that you're invested in payout dividends, you will have to pay 15 tax on the yields of those dividends, because the us protects their income by ensuring that foreign investors still have to pay some form of tax. It would be 30, but you have to fill in a wa ben form in order to be able to access this reduced rate of 15 and typically with pretty much every investment platform. That form will be pretty much automatically filled in the moment you fill in your application form. Other charges include things like the uk stamp duty, which you still have to pay even on a nicer account, and that is a 0.5 charge whenever you're buying any uk listed stocks, and there are some other much less common, much less known taxes that also apply that Are similar to those two in some other countries, including some european markets, the likelihood is, you probably won't be investing in companies that are based on those, so you'll probably never come across them.

In any case, once you've deposited the money in your stocks and shares iso account, you can then go and buy and sell stocks and reinvest money and reinvest in your dividend gains as often as you like. Whenever you want. There are no restrictions to how you can manage the account, including in subsequent financial years, even if, in those years you are then investing in the different kind of stocks and shares isa. The 20 000 limit applies strictly to depositing money into the account.

What happens with the money once it's inside the account in terms of your investment decisions and your decisions to buy and sell things that is completely separate and is not covered by the ice restrictions? I have several different videos where i go into a lot of depth on stocks and shares iso accounts in particular, and i'm gon na link those in the description below. So if you want to find out more about how they work some of the intricacies. Some really interesting quirks about them, make sure you go and watch those videos. There's some really interesting things in there.

You can earn quite reasonable returns on these compared to the cash isis. Typically speaking, if you're investing in one of those kind of managed funds, they tend to pay out something like three to five percent on average depending on the year. That's not great, but it's a lot better than, for example, a cash riser. If you're investing in an index based etf, typically things like the s, p 500 will pay something between seven and nine percent per year, with relatively low risk.

If you look over a hundred plus year period, there is a lot of volatility, though so some years you might be earning, say 17 like last year, but other years you might actually be losing money net for the year. So, there's going to be a lot more fluctuation with this type of investment. If you're investing in stocks, you that you've picked yourself, whichever ones that you prefer in your particular mix, there's potentially going to be a lot more variation. Maybe you're going to be earning huge amounts, maybe you're going to be losing a lot of money.

There's going to be a huge amount of variance, so it's kind of the investment decision is going to be up to you and the returns will also be up to those decisions. Next, let's talk about a type of isa account that is less known and many people probably have never actually heard of it. It's called an innovative finance, isa account and it's quite a complicated name, but it's really quite a straightforward thing. It is just your ability to invest in peer-to-peer lending without having to pay any tax on the earnings.

Peer-To-Peer lending is a system where people can go and invest their money into a platform. There's several different ones available in the uk, where you can go and put your money that is then lent out to a bunch of different people or to a bunch of different businesses. Those people and businesses are then going to pay that money back with interest. Just like a regular loan they're going to be paying considerably more interest than what you're going to be earning at the end, because some of those people and some of those companies may default on their payments, they may not be able to afford them that may go Into arrears - and you will never actually have the money back, there's also going to be a lot of processing costs.

Now the risk is generally for most platforms covered by the platform fee, but essentially it's still part of the equation. That's why you're not going to get the full amount so if, for example, you're investing in loans where the people who take those loans out are paying 12 19 or even more you're, probably only gon na be making about five to six percent after those other costs And the risk of the money has been taken account of the next type of iso. Account is called the lifetime. Isa account often affectionately abbreviated as lisa.

This is an account which has a limit different to all the others. You can only deposit up to 4 000 pounds a year into this account and you have to be between 18 and 40 in order to be able to open an account. However, once you've opened the account, you can then continue paying money in until the age of 50.. The uk government will then pay an extra 25 percent on top of the money you've put in up to a maximum of 1 000 pounds.

So if you use the full 4 000 pound a year allowance, essentially you're gon na be getting the full five thousand pounds put into your isa account. However, only the four thousand pounds that you put in so only the money that you put in counts against the twenty thousand total iso allowance. So in essence, if you go and deposit sixteen thousand pounds into other types of isis and four thousand pounds into this, one you're essentially going to be getting 21 000 pounds worth of money deposited into all your different accounts across the board. Now these lisa accounts actually work in exactly the same way as either cash isa accounts or stocks and shares iso accounts.

However, on the stocks and shares side, you can only get the fund versions. You can't get the ones where you have total flexibility into investing in lots of different types of stocks and shares at the moment that may change throughout this year, as these new companies are disrupting the situation. But at the moment you can only invest in those providing the managed funds. There are only two ways in which you can actually withdraw money from a lisa account.

The first is to buy a house, but that has to be your first house. It can be a new house or an upgrade or anything like that. It has to be your first house purchase, but not only that there are other restrictions as well. That house has to be worth 450 000 pounds or less at the point when you're buying it, and you can only buy it a minimum of 12 months after you open the lisa account or later so you can't go and open the lease account and hold the Money there for six months and then buy the house, you have to plan further ahead and the last one is: you have to buy it with a mortgage.

You can't just go and buy it outright. So if you're saving that money, that saving has to go towards a deposit towards a mortgage - hey guys, it's editor sasha here - i just realized while editing this video - that i completely forgot to mention. The second reason why you can withdraw money from your lisa account and it's really quite simple: you have to be age 60 or above, at which point you can go and withdraw the money without having to pay any penalty anyway. The really important point is that you can't withdraw the money from this account, except for those two purposes unless there's some exceptional circumstances like having a terminal illness.

But what that does mean is, if you do want to access that money, you technically can withdraw it, but you'll have to pay a substantial penalty fee up to the end of this financial year. You'll have to pay 20 percent of the amount that you're holding in it. If you want to go, withdraw it from the 6th of april 2021 onwards, you'll have to pay 25 as the penalty fee. So if you're wanting to go and open one of these accounts, you really want to use it either as some form of a retirement fund or as the deposit for your house purchase.

Those are the two reasons that exist for and those are the only two reasons people should use it for now there is another type of ice account available in the uk. It is called the junior ice account. This is a dedicated isa account for children under 18.. It can be had at any age and it is managed and operated by the parents of those children and those accounts work in exactly the same way and operate in exactly the same way as cash accounts or stocks and shares iso accounts.

But they have to be specifically junior versions of the ice account, so you can't go and invest in a regular iso account, that is say a cash account or a stocks and shares account on behalf of a child. It has to be a specific junior isa account in order for you to do that now. The limit on these accounts is nine thousand pounds a year, rather than the twenty thousand pounds that's available to adult iso accounts and there's one really important restriction. You can only go and access the money, so the child can only access the money once they turn 18..

The parents can't access it on their behalf. The children can't take it out. It has to stay in the account up until the age of 18. When that account stops being a junior iso account and becomes a regular ice account, at which point the child can either withdraw the money or transfer it to any other type of iso that they choose.

Let me go through some really important points. Some of these are going to a lot more details in videos that i'm going to link in the description below, but anyway, let's first talk about the limit. The limit is 20 000 pounds per financial year. The financial year runs from the 6th of april of one year to the 5th of april the following year.

So if you're planning to invest say in spring, you can invest 40 000 pounds by investing either side of that deadline and, in essence, in a relatively short space of time. You're going to be able to invest double the amount, but not only that, but that limit is per person. So if you're in a household where there's more than one adult that is eligible, for example, you have a spouse and typically say you only invest in your own name. Technically, if you decide for yourself to do it that way, you can invest money together.

On behalf of the spouse as well and make double the use of the allowance, if you that is not enough for you, there's done child allowance of 9 000 pounds as well that you can then utilize. So in essence, you can make a lot more use of these allowances than it might seem at first. The other big benefit of having a nice account is that you can go and invest one click into that like button below this video, and that will turn that, like button blue, and that will mean that this video can reach more people and i can go and Help more people with understanding everything they need to know about iso accounts and all the other investment related stuff that might improve their personal finances. So if you haven't done it already, please go just go and hit that like button and we'll get on our way.

The next actually important point i wanted to make is the fact that any gains you receive in any of your isa accounts do not count towards the 20 000 total. So if you get paid interest, if you earn dividends, if the stocks that you're invested in appreciate and value, none of that counts only the physical deposits, only the payments of money into the account that you make count towards twenty thousand pounds. So if you go and investigate twenty thousand pounds in stocks and shares iso account and in a few months time it's worth a hundred thousand pounds, that's fine. You've only invested twenty thousand pounds.

So when the next financial year starts, you can go and invest another 20. 000 pounds, and hopefully next year, will be as advantageous as the blast one. Although ice accounts mean you, don't have to pay these uk taxes that i mentioned earlier in the video. It is crucial to remember that some of these, in fact, a lot of these ice accounts, do charge a lot of other stuff.

For example, some of them will charge you account fees. Some of them will charge you management fees for the various funds you're invested in and all kinds of other fees. Some of them have exit fees so make sure you double check exactly what the cost structure of each of these is just because you're, not paying tax doesn't mean you're, not paying anything, and, in fact, in a lot of cases for the privilege of not paying tax. You have to pay a bunch of fees which kind of replace the tax that you're not paying so just be extra.

Careful next make sure you go and check the non-isa versions of the same accounts that you're planning to invest in, because in some cases the non-iso versions may actually be better than the isa accounts themselves. So, for example, the best ice savings account. So you can go and invest in cash. Ices available today will give you up to 9.6 interest, but there are other savings accounts available in weird and wonderful places on the internet, where you can get substantially more than that, in fact, so much more that even after accounting for tax you'd have to pay on The interest on those savings, in some cases, you're still going to be earning more than on the isa account itself same, goes for stocks and shares.

Some stocks and shares accounts are going to be more restricted. You can't buy into all the different kinds of stocks and all the different kind of markets, because there are restrictions placed in that. So if you feel that you can take advantage because you're, you know what you're doing - and you know particular companies you want to invest in, you may benefit more by investing in a general investment account. For example, one stock - that's really popular at the moment - is neo.

The chinese car manufacturer and that stock is not available in isa accounts, but it is in general investment accounts. It's also important to remember that if you're, not using your capital gains allowance for anything else and most people probably aren't, then a regular investment account still has up to three 12 pounds worth of gains that you can cash every single year without having to pay any Tax on capital gains: that's twelve thousand three hundred pounds in gains only so on the amount of money you've made on top of the money that you've invested and that's really really quite a good amount. And that means that in some cases, if you don't have a huge amount of money to invest a job, investment account can actually be just as good as an isa account if you're planning for relatively short periods of time to invest not that big an amount of Money, i hope you found this useful if you have any questions, make sure you leave them in the comments below. Thank you so much for watching.

I really really appreciate it and i'll see you guys later. You.