what is a Stocks and shares ISO account(ROTH IRA in US) and how does it work?
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You don’t mean ISA do you?
Since you are in Scotland I’ll presume you mean ISA.
And ISA is an individual savings account.
You can save a limited amount of money each tax year and avoid having to pay tax on the interest earned. You can save the money into a cash isa where you have interest paid as if you were keeping it in a bank account , and/or a stocks and shares isa where the money is invested in the stock market for you with the usual risk that values can fall but you won’t have to pay tax on an increase in value.
They both differ from a pension type product such as a SIPP ( and IRA?) in which you can invest in a way that gets you tax relief so the government in effect adds money to the investment amount but you can’t withdraw it till a certain age and there are rules about what you do with it – some if it will be tax free some may not.
In the UK, an ISA then it’s an account where you can buy stock and any sales or dividends you get are tax free.
The catch is that you can only invest £20k per year into the ISA.
This cash inflow is not net of anything you withdraw: if you invest £20k and then within the same tax year realise you need to withdraw £20k, you’ve effectively screwed yourself for that particular year.
Also – you can have multiple ISAs, but you can only invest in one ISA per tax year.
Other factors include not being able to use your ISA stocks as loan collateral.
Obviously, this is just musings. For proper advice, seek a financial expert.
In the US, there are two types of individual retirement accounts (IRAs): traditional IRAs and Roth IRAs. In both these two retirement accounts, an individual opens the account with a financial institution who then invests the money in financial instruments to help the person save for retirement. The difference between the two is in when taxes are paid. In a traditional IRA, the money deposited in the account is pre-tax and thus taxes are withheld on the withdrawal of the money. In a Roth IRA, the money deposited in the account is post-tax and thus withdrawals are tax-free.
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