When savers or investors make money while improving the planet, it’s clearly a win-win. But ISAs can take it even further by sheltering any returns from tax. We call it a “win-win-WIN”.
In the following paragraphs, we’re delving into how you can use your ISA allowance to make a real impact. But keep in mind that while this article is intended to be helpful, it’s not advice or a personal recommendation. Tax and ISA rules change and any benefits depend on your circumstances.
Using your ISA as a force for good
Your money is powerful. How you decide to save or invest can do a world of good - literally. It can be used to power renewable energy, democratise education and reduce carbon in construction… all at the same time.
Unlike many other banks offering environmental, social and governance (ESG) services, Triodos has already been investing into such planet-enhancing companies for thirty years. Impact investing isn't just a “unique selling point”, it's the entire reason for their existence, rooted in their foundations, philosophy and values.
“Impact investing” has become a bit of a buzzword, but it is distinct from other types of sustainable investing. To qualify as “impact”, the investments must use evidence and data to track progress against their impact goals. If your investment manager does not do this, they could be greenwashing.
At Triodos, you can rest assured that when managers say your investments or savings qualify as “impact”, they really do. You can track your impact on the Triodos Mobile App, where you can see data like how much CO2 you've helped avoid or water saved. You can also feel confident that your money will never be invested in companies which aren’t aligned to our impact goals.
ISAs help savers and investors keep more money
So how can you get started with tax-efficient impact investing? You may have already heard of the tax advantages of cash ISAs – where any interest on your savings is tax-free. But you can also have stocks and shares ISAs too.
Usually, if you invest and make a profit, you may need a pay a range of taxes, including Capital Gains Tax and Income Tax. Unsurprisingly, it can add up – especially when you consider that each time a fund is traded for another one, it counts as a sale, and you could be liable for tax on any profits.
ISAs, however, do away with all of that. You can save and/or invest up to £20,000 each tax year, tax-free. This means that you won’t pay any of these taxes, no matter how much money you make. Each year on 6 April (the start of the tax year), the £20,000 allowance resets itself.
Keep in mind though, that tax and ISA rules can change and any benefits will depend on your own circumstances.
How Triodos delivers ISAs with Impact
Triodos offer a range of ethical ISAs which allow customers to choose what best suits their financial goals – as well as their desired impact. Plus, you can split your £20,000 ISA allowance between different types of ISA, so you could put some money into savings and some into investments each tax year and save on tax.
For instant-access cash savings, Triodos offer an Online Cash ISA that can be opened with as little as £10. Unlike some ISAs, this is a flexible ISA which allows cash to be withdrawn and replaced in the same tax year without the replacement counting further towards the ISA holders’ subscription allowance for that tax year.
If you’re comfortable locking away your savings in exchange for a potentially higher rate, there’s also a Fixed Rate Cash ISA, which you can open from as little as £1.
For those looking at investing, Triodos offer a Stocks and Shares ISA which let you invest in their impact investment funds. They have four to choose from, and you can invest in some or all of them. Keep in mind though that investments go down as well as up in value, so you could get back less than you put in.
Triodos also provide an Innovative Finance ISA which allows confident investors who are happy to take on more risk the opportunity to invest tax-free directly in bonds with organisations delivering positive change. ISA eligibility does not reduce the risks associated with the investment nor guarantee returns. It is possible to lose all of the money invested. As with all ISAs, there are eligibility requirements for the IFISA.