Individual Savings Accounts (ISAs)

An ISA offers investment in stocks and shares (including unit trusts, investment trusts and OEICs) and cash. You are able to contribute to two components - cash and stocks and shares. You may hold one of each component per tax year, with either the same or different providers.

You are able to invest up to £5,340 into a Cash ISA and up to £10,680 into a Stocks & Shares ISA, subject to an overall annual limit of £10,680 to both ISAs. From 6 April 2012 the overall limit will increase to £11,280. Junior ISAs are now available with an overall limit of £3,600.

All capital growth under a Stocks & Shares ISA is free of personal liability to capital gains tax. Higher and additional rate taxpayers who invest in equity ISAs gain an income tax advantage, as outside an ISA there is income tax at 22.5% and 32.5% respectively on dividend income whether taken or reinvested.   Income tax deducted at source at 20% from interest on bonds, gilts and cash deposits is reclaimable in full by the provider for your benefit.

From the date of death these tax benefits end. Following this, your fund can be cashed-in without penalty and the proceeds paid to your legal representatives or re-registered to a beneficiary with the investment being held as a non ISA holding.

One of the other advantages of ISAs is that it is not necessary to include details of the income or gains to HMRC on your annual tax return.

THE SMALL PRINT

Past performance is no guide to future performance. Please remember that the value of an investment, together with any income, may fall as well as rise and an investor may not get back the full amount invested. Tax rules and regulations are subject to change.

Please contact us  for our latest ISA recommendations.