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