If investing on ISA accounts is Tax free, why people still investing in normal accounts?

Question

why is not everyone investing in ISA accounts if it is tax free? why people would rather invest in normal accounts and pay tax?? i don't get it, can someone explain me this?? thanks

Answer 1

people don't know about them and second reason you can only deposit a certain amount per year up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA, within an overall annual savings limit of £7,200

ISAs are held by more than 16 million individual investors

You can't use a ISA like a current account to pay your bills etc so most people stick with current accounts unless they are unlikely to touch their savings or need a current account as they have reached their yearly limit

Answer 2

probably not aware of this account, and probably a lot of people just use current accounts where they pay bills etc out of and let their money accumulate. Also maybe for the bigger savers there are accounts offering larger interest rates so this could out weigh the isa. My theory is to keep my money from that greedy goverment so i'm with Isa all the way.

Answer 3

Unfortunately, a lot of people are not aware of this account type, therefore do not reap the benefits. Alternatively, there is a subscription limit to ISAs of £3600 cash ISAs and £7200 stocks and shares (or total across both types if both are held). So perhaps these lucky people can afford to save more than tis and have already reached their limits; now have to invest in 'normal' ones!

Answer 4

It's not just the ISA allowances. You also can't take out, and then put back in again without using twice your allowance. For example.

My ISA allowance is £3,600 for this year, in a cash capacity. Let us say I invest £3,000 but want to buy a car that costs £2,000. If I withdraw this amount, I cant put it in again at a later date; thus I'd only be able to invest the remainder of my original investment (£3,000) plus the remainder allowable in that tax year (£600 in 2008/09).

Clearly then this is a large restriction for using the account as an every day deposit account.

ISA's are excellent and should be used for their tax advantages if you have the money to invest; but they should be used with a long term view. Of course you CAN withdraw, but you won't be truly benefiting from the tax advantages.

Answer 5

for a start there is a annual limit on the amount allowed to be invested in an ISA..

secondly i believe that retaining a certain in 'normal'accounts, allows for flexibilty and a degree of control, even if it means paying a little tax.