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 An ISA allows anyone aged 18 or over to save up to £7,000 each year (for 16-17 year olds this is £3,000 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 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.
Mini ISAs and Maxi ISAs
An ISA can be made up of an investment in cash, or longer term investments like stocks and shares or insurance.
Every tax year you can either invest in one Maxi ISA which can include all of these types of investments, or you can split this by having two Mini ISAs – one for cash and one for stocks and shares, which can both include insurance. However, you are not allowed to invest in both a Mini ISA and a Maxi ISA in the same tax year.
Investment limits
Mini ISA
These can be either a cash ISA or a stocks and shares ISA.
The maximum amount you can invest in each tax year (6 April to 5 April ) is as follows...
- £3,000 in a cash ISA, and
- £4,000 in a stocks and shares ISA.
You cannot invest in more than one Mini cash ISA, or more than one Mini stocks and shares ISA in the same tax year.
Maxi ISA
A Maxi ISA can include both cash and stocks and shares but you can only open one Maxi ISA in each tax year with the total investment being £7000.
Up to £3000 of the investment can be in the cash element.
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.
Changes from 5th April 2008
- There will be an increase in the overall investment limit from £7000 to £7,200.
- There will be an increade in the Cash ISA limit from £3,000 to £3,600
- The distinction between Mini ISA's and Maxi ISA's will be removed, subject to an overall investment limit of £7,200.
- PEP funds are also planned to be moved within the ISA wrapper.
How We Can Help You
Please contact us if you would like further information on ISA's.
Got a Question?
If you have any queries on any of the above, please ask a question
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