ISAs

NB - Legislation relating to Individual Savings Accounts is subject to change.

Individual Savings Accounts (ISAs) are available to all UK residents over 18 years of age, 16 years of age for the Cash ISAs. They benefit all taxpayers, as any income or capital gains received from investments held within an ISA do not have to be declared to the tax man. 

ISAs were introduced in 1999 and replaced PEPs and TESSAs, but if you have one of these accounts, you can keep PEPs indefinitely and TESSAs until maturity.  Furthermore, if you have a maturing TESSA you can rollover the original capital (without accrued interest) into a TESSA only ISA without affecting your ISA allowance in that tax year.

ISAs can invest in cash or longer term investments like stocks and shares (including unit trusts, investment trusts, Open Ended Investment Companies, some fixed interest securities, or any share quoted on a stock exchange recognised by the Inland Revenue.)

In April 2008, the old Mini and Maxi ISA's disappeared and investors now have a choice between a Cash ISA and Stocks and Shares ISA.

Investment Limits

Changes in ISA rules for those 50 and over

If you are 50 or over you can put more money in both cash and stocks-and-shares ISAs from 6 October 2009. If you turn 50 between 6 October 2009 and 5 April 2010 you can top up any time from 6 October – you don’t have to wait till your 50th birthday.

The current ISA rules are:

  • The annual investment allowance for those 50 and over is £10,200. Up to £5,100 of that allowance can be saved in cash with one provider. The rest can be invested in stocks and shares with either the same or a different provider.
  • The annual investment allowance for those under 50 is £7,200. Up to £3,600 of that allowance can be saved in cash with one provider. The rest can be invested in stocks and shares with either the same or a different provider.
  • From 6 April 2010 the annual investment will rise to £10,200 (of which £5,100 can be saved in cash) for everyone.
  • You can invest in two separate ISAs each tax year – a cash ISA or a stocks and shares ISA.
  • You can transfer money saved in a cash ISA to a stocks and shares ISA – but you can't transfer money the other way.

Cash ISA's - Cash ISA's are wildly available with different interest rates. It is a good idea to shop around for the best Cash ISA rates. It is important however to understand the conditions attached to those rates, for instance access may be restricted in order to achieve that particular rate. The limit for a cash ISA is £3,600 or £5,100 if you are aged 50 or older.

Stocks & Shares ISA- There is no upper limit on the stocks and share holdings this type of ISA.  Your entire ISA allowance can be in stocks and shares.  However if you hold a Cash ISA which you have taken out in the same tax year, you will be restricted to the difference between the overall ISA limit and what you have deposited in the Cash ISA.  The Stocks & Shares ISA is one account and managed by one provider.


Read More : Self Select ISAs

ISAs

NB - Legislation relating to Individual Savings Accounts is subject to change. See Budget 2007 for more details.

Individual Savings Accounts (ISAs) are available to all UK residents over 18 yrs of age. They benefit all taxpayers, especially those paying the higher rate. Unfortunately, they are not quite as easy to understand as they should be. Here goes:

They're the latest Government scheme to stop the taxman getting his hands on your savings, replacing PEPs and TESSAs, but if you have one of these don’t worry, you can keep your existing PEPs indefinitely and TESSAs until maturity.

You can invest via a number of components within an ISA; cash, stocks and shares to include unit/investment trusts, Open Ended Investment Companies (OEICs), Gilts (bought with at least 5 years until maturity), or any share quoted on a stock exchange recognised by the Inland Revenue.

If you have a maturing TESSA you can invest the original capital (without accrued interest) into a special TESSA only ISA. This will not effect your ISA allowance in the given year.

This is where it gets complicated!

Basically, you can invest a maximum of £7,000 into ISAs (2007/2008). You can choose to do this by having up to two mini ISAs- Mini Cash and Mini Stocks & Shares or by putting the entire £7000 into one Maxi ISA. You cannot run a Mini and a Maxi ISA together and you cannot have two Mini ISAs of the same type, i.e. two Mini Cash ISAs.

The 2007 Budget sets out changes designed to simplify the ISA regime and increase its flexibility. The changes, which won't take effect until the 2008/2009 tax year, are:

  • the Chancellor announced that ISAs would be available permanently past 2010
  • rise in the cash ISA allowance from £3,000 to £3,600 and overall ISA limit to £7,200
  • to remove the Mini/Maxi distinction
  • to allow transfers of the cash component of ISAs from past years into Stocks & Shares ISAs without affecting current annual limits 

 

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