ISA's - Act Now or Lose Your Annual Allowance
Wed 10th Feb 2010
Saving the Pennies
Are you using your ISA allowance?
Did you know that every tax year you have the opportunity to invest in stocks and shares through an Individual Savings Account (ISA)?
And did you know that, unlike other forms of investment, with an ISA you won’t pay income or capital gains tax on any growth? Remember, tax treatment depends on your individual circumstances and may change in the future.
ISA Information
An ISA is not a product on its own, but a tax wrapper around a savings or investment product, which protects your interest from being taxed. You can invest in two separate ISAs in any one tax year:
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a cash ISA – Cash ISAs generally pay a higher interest rate than normal savings accounts, and the interest earned is free of income tax.
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an investment ISA - You invest in longer-term investments such as individual shares or bonds, or pooled investments (such as open-ended investment funds, life assurance investments or investment trusts).
The current ISA limits for 2009/2010 are:
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£10,200 for those aged 50 and over. Up to £5,100 of that can be saved in cash with one provider. The rest can be invested in an investment ISA with either the same or a different provider.
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£7,200 for those under 50. Up to £3,600 of that can be saved in cash with one provider. The rest can be invested in an investment ISA with either the same or a different provider.
From 6 April 2010 the limit will rise to £10,200 (of which £5,100 can be saved in cash) for everyone.
If you choose to invest the whole allowance in an investment ISA, this can only be with one provider in any one tax year.
Take a fresh look at your existing ISA’s
If you have existing ISA’s with other providers, transferring them could help you to refresh your investments and reduce paperwork. It is important to regularly review your existing investments to make sure they are still suitable for your needs.
Transferring your existing ISA’s should be straightforward, and we can help you to decide whether this would be the right move for you.
Transferring an ISA
You can transfer money from a cash ISA to an investment ISA, but not the other way round. Not all providers accept transfers, so check before you sign up. If they do, you will need to ask the new ISA provider to arrange the transfer. ISA’s must always be transferred, you can’t close the old one and start a new one, otherwise you will lose the tax advantage. Consider switching an existing investment ISA if you feel the rate is not competitive. But if you have a fixed-rate ISA, check whether you will pay a penalty when transferring.
Want to know more?
I’d welcome the opportunity to tell you more about the benefits of investing in a ISA and give you advice on how you could use one to help you meet your financial goals.
If you would be interested in arranging a meeting to discuss this further please call us on 02890 329042 and we will be happy to help.
Things to consider
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You might see marketing from firms encouraging you to make full use of your ISA limits, or transfer money from cash ISAs into investment ISAs. It is a competitive market, so make sure you understand what will happen to your money and what restrictions there might be.
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Interest rates are low at the moment so the idea of putting more of your money in investments might appeal. But make sure you understand how your money will be invested.
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If you decide to switch from cash to investments, make sure you are happy with the extra risk and the fact you could lose some of your money.
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know what you need to do to get the headline rate offered and make sure you're comfortable with it;
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ask questions if anything is not clear;
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check with your existing ISA provider for any costs of transferring out if you're thinking of switching; and
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don't sign anything until you're satisfied.