Individual Savings Accounts – ISAs
What are ISAs?
Individual Savings Accounts, or ISAs, are a tax wrapper in which you can hold a variety of different investments. They replaced PEPs and TESSAs when they were introduced in April 1999. ISAs are available as Cash ISA’s or Stocks and Share ISAs.
ISA Tax Benefits
ISAs can be an effective way of protecting your savings or investments from tax. Any growth to your savings or investments inside the ISA tax wrapper is not subject to Capital Gains Tax or Income Tax.
ISA Allowances
There are restrictions to how much you can pay into an ISA. From April 6 2010 you can pay a maximum of £10,200 per tax year into your ISA. Up to half this amount (£5,100) can be invested into a Cash ISA, with the remainder being invested in Stocks and Shares. Not including any capital growth, someone who has made full use of their ISA allowances every year since 1999 will have sheltered £77,400 (£80,400 if they are over 50) from Capital Gains Tax and Income Tax.
What can I invest in an ISA?
As the name suggests, in a Cash ISA you may only invest in Cash. In a stocks and shares ISA, you may invest in a variety of non-cash assets such as Unit Trusts, OEICs, Investment Trusts, Exchange Traded Funds, Shares or Bonds.
How can I pay into an ISA?
The ways you can pay into an ISA vary depending on the provider, and type of ISA. Most fixed rate cash ISAs (where the interest rate paid is fixed) will only allow a single lump sum deposit. There are also "easy access" and "notice account" cash ISAs, most of which allow money to be paid in at any time. Stocks and Shares ISAs also often give you the option to pay in a lump sum deposit, or make regular contributions.
Can I transfer an ISA?
You can transfer your ISA to a different provider. You may transfer into a Stocks and Shares ISA from a Cash ISA, but not the other way around. Some Cash ISAs may not accept transfers. There may be costs involved in transferring an ISA, and you should weigh these up against the benefits of the transfer.
Can I withdraw an ISA?
Easy access Cash ISAs usually allow you to withdraw at any time. In Stocks and Shares ISAs, Shares or units in managed funds can normally be sold at any time. Fixed rate Cash ISAs do not normally allow withdrawals, and so a withdrawal may result in a loss of interest as a penalty. Money withdrawn from an ISA will lose its tax free benefits, and so you should think carefully and seek Independent Financial Advice before doing so.
If you are considering an ISA, or any other form of Investment or Savings, contact Mike Robertson Associates to speak to a qualified Independent Financial Adviser.
