Happy ISA tax year

This tax year you can shelter up to £11,280 from tax by investing in an Individual Savings Account (ISA). During his Autumn Statement last December, the Chancellor, George Osborne, announced plans to increase the ISA limit to £11,520 from 6 April this year.

ISA allowance
Each tax year you have an ISA allowance. For the tax year 2012/2013 (6 April 2012 until 5 April 2013) you can save up to £5,640 in a Cash ISA with the remainder in a Stocks & Shares ISA, or you can invest your full allowance in a Stocks & Shares ISA. You’re only permitted to invest with one Cash ISA provider in each tax year and the same, or another, Stocks & Shares ISA provider.

Make up any unused shortfall
If you haven’t already used up your full ISA allowance you can’t retrospectively make up any unused shortfall later – it’s lost forever. UK residents aged 16 and over can choose to save in a Cash ISA or, if they are 18 or over, a Stocks & Shares ISA or a combination of both. Parents or guardians can also open a Junior ISA for children under 18.

The interest on a Cash ISA isn’t taxed, so all the interest you earn you keep. With a Stocks & Shares ISA, all gains are free from Capital Gains Tax and you don’t need to declare your ISA investments to the taxman.

The value of investments and the income from them can go down as well as up, and you may not get back the full amount invested. The tax benefits and liabilities will depend on individual circumstances and may change in the future. Past performance is not a guide to the future.

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