Investment Trust ISA

These ISAs have a focus on long-term returns, helping individuals build wealth in a convenient and tax-efficient way over the course of many decades. These types of ISAs have a £20,000 personal allowance to use for the current year, meaning there is no capital gains tax to pay on any income received or any future profits. They’re a great way to protect your savings from tax implications and liabilities.

What is an Investment Trust ISA?

Before we get into the technicalities, we’ll explain a few key terms:

• Investment Trust ISA: This is a portfolio of investment trusts that are held within a stocks and shares ISA.
• An Investment Trust: This is a publicly listed company that invests, on your behalf, in other companies within a certain sector. So you buy shares in the trust and then you benefit from the money the trust makes from investing.
• Active Management: Investment trusts are actively managed. This means a professional fund manager will oversee the investments, using their experience and knowledge to decide to buy or sell shares on your behalf.

Types of Investment ISA

• Cash ISA: This is a simple, individual savings account. You pay money in and you earn interest on your savings. You can choose between a variable or fixed interest rate ISA.
  • A cash ISA is:
    • Lower risk
    • Great if you are saving for less than 5 years
    • Good for those who don’t want to risk losing money due to stock market movements
    • Ideal if you want to be able to take your money out at short notice
    • Not for you if you are looking for longer-term/higher, returns

• Stocks and Shares ISA: With a stocks and shares ISA the money you save will be invested into various stocks and shares, as opposed to being held in savings like a cash ISA. Some stocks and shares ISAs let you choose your investments yourself, others will be actively managed.
  • A stocks and shares ISA is:
    • For people who have a higher risk tolerance
    • A potential way of growing your finances over an extended period
    • Susceptible to changes in the market, so your savings may diminish

• Innovative Finance ISA:  This type of ISA can help you earn tax-free interest on peer-to-peer lending. With this type of ISA, investors are matched with borrowers (this could be an individual, business or property developer). You effectively cut out the middle man, lending your savings to the borrower who will pay you back with interest.
  • An innovative finance ISA is:
    • For clients that are either; a high net worth individual, a certified/self-certified sophisticated investor, or a restricted investor
    • For those who have a high-risk tolerance, there are limited protections if the borrower defaults
    • Not protected by the Financial Services Compensation Scheme

• Lifetime ISA (LISA): You can pay up to £4000 per year into a LISA, and you can use these savings towards buying a house in the UK or retirement. The state adds a bonus of up to £1000 a year on top of your savings.
  • A LISA is:
    • Good for those who want to save for retirement or a house
    • Good for those who have low-risk tolerance, as the money is not invested elsewhere
    • Not a better alternative to a traditional pension; in most cases, using a pension to save for later life is better than a LISA

• Junior ISA (JISA): This lets you save/invest up to £9,000 each year (as of the 24/25 tax year). You invest on behalf of a child, and the cash is locked away until the child turns 18; after this they can take it as a lump sum. It’s a savings option that encourages parents to save for their children’s futures without any tax liabilities.
  • A JISA is:
    • For the legal parents or guardians of the child, the JISA is for
    • A way to save for your child
    • A way to reduce how much inheritance tax your child is liable for. They won’t pay any tax on the money their JISA makes, so this is a good way to save for their future

• Ethical investment ISA: This type of ethical ISA uses your money to contribute to positive change. Ethical investment ISAs invest in ethical stocks and shares, meaning your money can have a positive impact on the world. Triodos Bank, for example, is an ethical investment ISA that lets you see the impact of your investments converted into CO2 emissions avoided, water saved or trees planted.
  • An ethical investment ISA is:
    • One that invests in companies that are positively contributing to the world
    • Susceptible to various levels of risk, depending on your particular portfolio and investment funds
    • Protected through the Financial Services Compensation Scheme

Using Your Tax Allowance

Everyone has a yearly allowance for how much they can pay into these ISAs. As of the 2024/2025 tax year, this is currently £20,000 a year.

This money can be invested into a single ISA or it can be split across several ISA. The LISA and the JISA are the only two that have their own specific allowances, being £4,000 and £9,000 annually, respectively.

This means your yearly savings could look like this:

• £4,000 into a LISA
• £9,000 into a JISA
• £4,000 into a cash ISA
• £3,000 into a stocks and shares ISA

At the end of that financial year, your ISA will not close. You’ll keep the savings in it, then you can invest again in the next financial year.

You do not pay tax on the interest you earn on a cash ISA or the income/capital gains you make from an investment ISA.

Choosing an Investment ISA

When choosing an investment ISA, the first thing to remember is that it is an investment, rather than savings. If you are looking for a simple, risk-free, way to save, a cash ISA is a better option.

If you do decide you have enough risk tolerance to invest, here are some things to consider:

1) Time

If you want to invest for 5 years or less, a cash ISA might be better. Or, if you are happy to invest longer term, like over the course of several decades, it might be better to invest in a variety of ISAs.

2) Risk

As well as time, risk is the other important factor to consider. If you are investing longer term, or you have lots of capital to work with, you might be more tolerant of risk. On the other hand, if you are very sensitive to risk, you should invest carefully. In most cases, investing in a variety of bonds, ISAs, and commodities can make your portfolio more tolerant of market changes.

3) Regularity

If you want to invest, it can be a good idea to create a plan for regularity. You might want to set yourself a goal of X amount of money invested each month. Instead of trying to pick when/how much to invest, look at it as drip-feeding your portfolio.

4) Compounding

One particularly attractive part of investing is compounding. This means that over time the returns you make will start generating their returns (if you reinvest them). This can start a snowball effect.

Beaumont Wealth’s Investment ISA Service

ISAs are a very useful tool in financial planning, and at Beaumont Wealth, we will always look to use your tax allowances and tax-advantaged options appropriately, bearing in mind your unique circumstances.

With Beaumont Wealth, it is simple to open, transfer or top-up an ISA and we will share our knowledge, insight and expertise to help you invest with confidence.

Our clients are at the centre of everything we do, and we offer a free initial meeting. Let us help you achieve your financial goal by contacting us today. Get in touch here.