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Individual Savings Accounts (ISA's)

An Individual Savings Account (ISA) allows anyone aged 18 or over to save up to £7,200 each year (for 16-17 year olds this is £3,600 cash) and not pay tax on the income you receive from the investment.

They are now a permanent feature of the savings landscape.

Tax Advantages of ISAs

• All income from the ISA is received tax free.
• There is no capital gains on the investment.
• Money is not locked in by the tax rules although some accounts will have notice periods. However, if you withdraw funds, you will only be able to re-invest later in the same tax year up to the balance remaining on your investment limit.
• They are not reportable to HMRC.

Cash ISAs and Stocks & Shares ISAs

From 6th April 2008, Mini and Maxi ISA's no longer exist.

An ISA can be made up of an investment in cash, or longer term investments like stocks and shares or insurance.

Up to £3600 of the £7,200 limit can be saved in a cash ISA with one provider.

The balance up to £7,200 can be invested in stocks and shares, either with the same or an alternative provider. Therefore you can either invest up to the £7,200 limit in equities or up to £3,600 in cash and £3,600 in equities.

Transferring an ISA
You can transfer your ISA to another ISA manager if it is the same type of ISA. For example, you can't move funds from a cash ISA with one manager to a stocks and shares ISA with another.

You cannot do this yourself by closing one and paying the money to another ISA manager. The transfer must be directly between the existing ISA manager and the new one and in some cases there may be a charge for transferring.

PEP's

From 6th April 2008, old PEP accounts are re-branded as ISA's.

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