Why ISAs Are a Con

Dr Vernon Coleman MB ChB DSc FRSA

Banks and investment companies in the UK are constantly trying to persuade the financially naÔve to take out an ISA. They claim that the tax relief available makes this particular type of investment extremely attractive.

Donít listen to them.

Itís a con.

First, the people offering cash ISAs always start off with an attractive rate of interest. But then, within weeks, they quietly reduce the rate of interest until the tax relief on offer becomes irrelevant.

Second, the rules and regulations make ISAs hopelessly complicated to get into and hopelessly complicated to get out of.

Third, as far as most people are concerned there is no point in buying shares in an ISA because the tax people allow everyone to take £11,000 a year in tax free capital gains. And most people who invest in ISAs donít use this allowance.

Fourth, if you lose money because the value of your shares falls inside an ISA then youíve lost the money forever. It has disappeared. But in the real world (outside ISAs) you can put your losses against your gains before you have to pay any capital gains tax. This fact alone makes ISAs a bad idea.

Copyright Vernon Coleman

Vernon Colemanís book Moneypower (The secrets of power over money and the essential principles of macro investing. Tactics and strategies for the thinking investor.) is available as an ebook on Amazon.

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