LMJ is a firm of independent financial advisers specialising in the management of investment portfolios and pensions. We have been helping clients navigate complex financial markets since 2001 and from those very early days, our business has evolved primarily through client recommendations. Read More
ISAs remain one of the most tax efficient solutions for your savings. On 1 July 2014, several restrictions were removed to improve flexibility and transfer options.
Under the so-called New ISA (or NISA), Cash ISAs and Stocks and Shares ISAs have effectively been merged, with the overall limit increased to £15,240. This can be invested in either Cash, Stocks and Shares, or a mixture of both.
You'll also be able to transfer new and previous years' ISA investments from Stocks and Shares into Cash, and vice versa, as opposed to previous rules which restricted cash ISAs being transferred into Stock and Shares ISAs.
From Autumn 2015 individuals will be able to withdraw money from their cash ISA and replace it in the same year without it counting towards their annual ISA subscription limit for that year.
What is an ISA?
Available since April 1999, ISAs offer an attractive tax-efficient investment to anyone aged 18 or over (16 or over for cash ISAs).
With standard bank and building society savings accounts, taxpayers normally have to pay tax on any interest earned on their money. The tax is deducted from the interest before it is paid out, reducing the amount received.
Similarly, tax must be paid on the income and profits made from investments in the stock market, either directly or through unit trusts and OEICs.
ISAs, however, serve as a kind of 'wrapper' to protect savings from tax. This allows individuals to invest in a range of tax efficient savings and investments, and pay no personal tax at all on the income and/or profits received.
However it is not possible for ISA managers to recover tax deducted at source from UK dividend income.
The Government has said that the ISA will be available indefinitely.
Help to buy ISAs
A new ISA for first time buyers will offer a Government bonus when investors age 16 or above use their savings to purchase their first home. For every £200 a first time buyers saves, there will be a £50 bonus payment up to a maximum of £3000 on £12000 savings. The bonus will be available on purchases of homes up to £450,000 in London and up to £250,000 elsewhere.
The bonus will only apply for home purchase. Savers will have access to their own money and will be able to withdraw funds from their account if they need to for any other purpose.
The main benefits of an ISA
No personal tax (income or capital gains) on any investments in an ISA.
Income and gains from ISAs do not need to be included in tax returns.
Money can be withdrawn from an ISA at any time without losing the tax breaks.
Tax treatment varies according to individual circumstances and is subject to change.
How ISAs work
There are two types of ISA, which may contain one or more of the following components:
Stocks and shares, in the form of either individual shares or bonds, or pooled investments such as open-ended investment funds, investment trusts or life assurance investments.
Cash, usually containing a bank or building society savings account.
Junior ISAs are now also available as both stocks and shares Junior ISAs and cash Junior ISAs. Your child can have a Junior ISA if they:
The value of your investment may go down as well as up and you may get back less than you invested.
Levels, basis of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor
LMJ Financial Management Ltd
Upper South Hall
Bullen Farm Business Centre
Kent, TN12 5LX
Tel: 01732 874111
Fax: 01732 874222
To download our personal finance magazines and financial guides packed full of informative financial news, simply register your email address.