Take advantage of your ISA allowance before time runs out

As we approach the tax year-end, you may not yet have taken full advantage of your 2009/10 ISA allowance. In this event you are in danger of losing it forever. We are encouraging all clients and associates to act now while there is still time!

What is an ISA?

 

ISAs offer an attractive tax-free shelter 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 like company shares or unit trusts.

 

 However, ISAs serve as a kind of ‘wrapper’ to protect savings from tax, allowing individuals to invest monies up to maximum limits (by way of regular or single amounts) each tax year in a range of savings and investments and pay no personal tax at all on the income and/or profits received

 

The main ISA benefits are:

 

    * 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    * Money can be withdrawn from an ISA at any time without losing the tax breaks.

 

ISA Maximum Contribution Limits

 

Since 6 October 2009, the ISA maximum contribution limits have been amended and are currently based upon your age. These contribution limits are detailed below.

 

Timeline

          

Post 06/10/09 but pre 06/04/10 -

Overall maximum: Age 50+ - £10200, Under 50 - £7200

Maximum in cash: Age 50+ - £5100, Under 50 - £3600

From 06/04/10 -

Overall maximum: Age 50+ - £10200, Under 50 - £10200

Maximumi n cash: Age 50+ £5100, Under 50 - £5100

Therefore, if you have celebrated your 50th birthday since 6 October 2009 (or do so before 6 April 2010), you are eligible for the higher contribution limits for tax year 2009/10.

 

The basics of how ISAs work

 

There are two types of ISA:

 

Stocks and Shares:

ISAs 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.

 

All of your allowance can be invested in stocks and shares, or you can split it by investing in cash (the maximum permitted) and the remainder in stocks and shares with either the same or a different provider.

 

You will also be able to transfer money saved in previous years' cash ISA holdings to stocks and shares ISAs without affecting your current year's allowance. It should be noted that it will not be possible to transfer in the opposite direction i.e. stocks and shares ISA to a cash ISA.

 

Qualifying Investors

 

To be eligible to invest in an ISA, an investor must meet the following criteria:

 

·        Be an individual (i.e. not a company or trustee) who is 18 years of age or over (except that 16 and 17 year olds are able to invest up to £3,600 in a cash ISA which will increase to £5,100 as from 06/04/2010)

 

·        Be resident and ordinarily resident in the UK

 

Each individual may effect a stocks and shares or cash ISA each tax year. A husband and wife are treated as separate individuals so that although joint ownership of an ISA is prohibited each may fully subscribe to one in their own name.

 

 

What should we do next?

 

If you are interested in finding out more or want to make the most of your ISA allowance for 2009/10 please contact us to discuss the opportunities available to you.

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