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It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.
The 2022/23 tax year ends tomorrow at midnight. We use Google Trends to see if people are looking at Cash ISAs or Stocks and Shares ISAs.
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
Over recent years even the best Cash ISA rates were so low that it made them almost pointless. Most people didn’t get enough interest to worry about having to pay tax, so could leave their money in a normal savings account. It also made people consider taking extra risk and choosing to invest their money in a Stocks and Shares ISA in search for better returns.
This year is different. Cash ISA rates are on the rise and interest has grown. But what could be right for you – a Cash ISA or Stocks and Shares ISA?
We take a look at the differences and explain how to choose between them.
This article isn't personal advice. As with most money decisions, the right option and how much you benefit from tax rules will depend on your situation and goals. Plus, tax rules can and do change. If you’re not sure if an ISA is right for you, ask for financial advice.
Google Trends analyses what people are searching for and how that compares to any time since 2004.
To make comparisons between search terms easier Google shows results from 0 to 100, where 100 is the maximum search interest for the time selected. This lets us compare search volume trends across different topics, even when the number of people searching on Google changes constantly.
Searches for Cash ISAs is still some way short of it’s peak in 2013. But we’ve seen a resurgence in recent years with search volumes at the highest levels since 2015. In fact, looking at February alone, Cash ISA search volumes were almost three times higher than the year before. And the highest February since data started.
What about Stocks and Shares ISAs?
Search volumes for Stocks and Shares ISAs are normally lower than Cash ISAs. But that has narrowed significantly over the last 10 years.
While Cash ISA search volumes have risen 16% since Feb 2013, Stocks and Shares search volumes have quadrupled. And those high levels are broadly level with last year.
So it seems more of a return of interest in Cash ISAs rather than a shift from Stocks and Shares ISAs.
Source: Google Trends correct as at 10 March 2023.
The main benefit of ISAs is the ability to grow your money, or receive an income, without having to pay UK income and capital gains tax.
Assuming you’ve decided an ISA is right for you, the decision then becomes more about saving versus investing.
With a Cash ISA you get the guarantee of regular interest. This is saving. And although, savings rates are much lower than the rate of inflation right now, there’s security in knowing you can’t get back less than you put in, it’s a safer place for your short-term savings.
So if you’re saving for a specific goal within the next few years, keeping your money in a Cash ISA could be a good option. But just make sure you’re looking around for the best deal.
A Stocks and Shares ISA could be an option if you have money you’re not planning to spend in the next five years. You invest your money, giving it the potential to grow by more than sitting in cash – especially over the long term.
But there’s a trade-off. Unlike cash, the value of investments rise and fall. This means you could get back less than you put in.
The key for any new and existing investors is to always focus on your long-term goals and make sure the rest of your finances are in a solid place before you invest. Clear any short-term, expensive debts. Have a healthy cash savings pot ready for emergencies.
If you’re torn between both ISAs, there’s always the option of having both.
There’s nothing stopping you as long as you don’t go over the annual ISA allowance – £20,000 in this tax year. Though you can only open one of each type of ISA every tax year.
You can also hold cash in a Stocks and Shares ISA temporarily. This gives you the option of holding your money as cash while deciding where you want to invest.
With the end of the tax year fast approaching, time is running out to open an ISA this year. But don’t worry, once you’ve decided to get started, you can usually open your ISA in minutes online.
All you need is your debit card and National Insurance number to hand.
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