INVESTMENTS

Individual Savings Accounts (ISAs) are tax-free Savings accounts which means individuals do not have to declare any income or capital gains they receive to the Taxman.

Who can open an account?
To open an ISA individuals must be 18 years old or over. However, if an individual is aged 16 and over they are entitled to open a Cash ISA or the cash component of an ISA. Individuals must be UK residents for tax purposes. People working abroad or Spouses and Civil Partners of individuals working abroad, for example Civil Servants or Armed Forces who are paid by the British Government, are also entitled to open an ISA.

ISAs cannot be held as joint accounts or on behalf of other individuals.

NEW ISA & PEP RULES

From 6th April 2008, ISA & Pep rules have changed.

1. Firstly, Personal Equity Plans (PEP’s) have now become a stocks and shares ISA.

The ISA structure has now been simplified and the following rules now apply.

2. The maximum total annual contribution has increased from £7,000 to £7,200, so you can save a little more each year, tax free.
3. The maximum allowable cash portion has increased from £3,000 to £3,600.
4. The mini and maxi ISA distinction no longer exists. Any maxi or mini ISA is now simply called an ISA. Mini stocks and shares ISAs and any stocks and shares component of a maxi ISA have become a stocks and shares ISA.
5. Mini cash ISA's and any cash component of a maxi ISA has become a cash ISA.
6. The full £7,200 allowance can be invested in stocks and shares, or you can choose up to £3,600 into a cash ISA.

For example; you save £1,500 in a cash ISA at the start of the tax year. In the same year, you could invest up to another £2,100 in the same cash ISA or up to £5,700 in a stocks and shares ISA with either the same or a different provider.

7. Funds are now transferable from a cash ISA into a stocks and shares ISA, However you cannot transfer from a stocks and shares ISA to a cash ISA.

With Cash ISAs investors will benefit from a minimum return amounting to the sum invested over the term plus interest.

Stocks & Shares Component - this component allows individuals to invest in collective shares, for example, Unit Trusts, Investment Unit Trusts, shares listed on a recognised stock exchange, bonds and gilts and Life Assurance. This type of ISA is good if individuals are able to leave their money alone for a long period of time, usually over five years or more, and are comfortable taking on the risk of market fluctuations in the value of their investment.

With these types of accounts there is no guarantee that the return when cashed in will exceed the amount invested.

Some providers will offer instant access to money with no penalty or loss of interest. Some other providers have restrictions, such as a fixed term or require notice to be given before money can be withdrawn. If a withdrawal is made within a fixed period then a penalty or loss of interest may result.

When the maximum allowance has been invested for one financial year individuals are not able to invest any more even if a withdrawal has been made.