isas
Individual Savings Accounts are a tax efficient way of saving as
they are free of capital gains tax and free of income tax on
the interest arising from cash deposits and bonds. Share dividends
within ISAs have 10 per cent tax deducted at source which
is not reclaimable..
ISAs were introduced for an initial 10 year period in 1999
but the Government has confirmed that this is to be extended
indefinitely.
The overall annual investment allowance rose to £7,200
on 6 April 2008 (up to £3,600 can be invested in cash and £3,600 in stocks and shares) or the full £7,200
invested in equities.
There are also significant changes to the structure of ISAs
and their predecessors, Private Equity Plans or (PEPs), effective since 6 April 2008.
These changes include:
- Existing PEP and TESSA only
ISA (TOISA) accounts are re-designated as stocks and shares,
and cash ISAs, respectively;
- The distinction between mini and maxi ISAs is abolished,
with accounts being re-designated as "cash accounts" and "stocks
and share accounts;"
- Transfers from the cash component of existing ISAs are
permitted into the stocks and shares component and will not count
against the current year's ISA subscription (but the reverse,
namely equities to cash, is not possible);
- Money held in child trust fund (CTF) accounts can be rolled
over into an ISA once a child reaches 18.
For more on ISA, read our Basic Guide to
ISAs. If you are interested in picking your own shares for
investment in an ISA, read our Guide to Self
Select ISAs.