ISAs
ISAs
Individual Savings Accounts (ISAs) were first introduced in April 1999 by the Labour Government to replace Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs).
Last year, the Labour Government announced significant changes to the future limits and structures of ISAs and these changes came in to effect from 6 April 2008. In turn, ISAs will become less complicated and allow greater flexibility for the investor.
What is an ISA?
ISAs are ‘tax-free wrappers’ you can save cash or invest stocks and shares in. This means that you do not pay tax on the income you receive from your ISA, or pay tax on the interest your savings earn - no matter how much your investment grows or how much you withdraw in any financial year.
Each year, you have an tax-free allowance of £7,200 and this may be all be invested in a Stocks and Shares ISA or up to £3,600 can be invested in a Cash ISA.
- You don’t have to pay any income tax on your investment growth.
- You don’t have to pay any capital gains tax from the money arising from your investments.
- You don’t have to tell the taxman if you hold an ISA on your tax return.
- You can take an ISA out at any time though a notice period or restrictions may be put in place depending on your ISA fund manager’s rules.
Stocks and Shares ISAs
These are generally used for long term savings in stocks and shares. Whether you wish to invest all your money in stocks and shares or wish to make a cash investment, you must invest all your money with the same ISA fund manager - so it is important that you find the ISA most suitable for you. You must be a UK resident aged 18 or over to take out a Stocks and Shares ISA.
Cash ISAs
These are generally used for short term saving. You can guarantee quick access to your money and make withdrawals at any time, though you need to check policy restrictions and notice periods, as these tend to vary between ISA providers. You must be a UK resident aged 16 or over to take out a Cash ISA.
Why were ISAs introduced?
ISAs were set up to encourage both long term and short term saving and have since proved one of the most popular tax efficient ways to save and invest money. They were only guaranteed to run until 2009; however the new changes to ISA rules, that come in to effect from 6 April 2008, mean that ISAs will remain indefinitely.
Please note: all investment returns are determined by performance, marketing conditions and overall economic factors which may not be repeated in the future. Therefore, past performance is not necessarily a guide to future returns.
Asset Classes
Find out which asset class is most suitable for you: Cash, Equities, Property or Bonds
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