At McDade Roberts we always advise clients on the most tax efficient ways to make and save money. One popular component to individual savings is the ISA.
What is an ISA?
ISAs are tax-exempt savings accounts available to individuals aged 18 or over who are resident and ordinarily resident in the UK. ISAs are only available to individual investors and cannot be held jointly.
ISAs are guaranteed to run for ten years although there is no minimum period for which the accounts must be held.
Investment limits
The overall annual savings limit is £20,000 from 6 April 2017.
Investment choices
Investors are allowed to invest in a cash ISA, an investment ISA, an Innovative Finance ISA, or a combination of the three subject to not exceeding the overall annual investment limit.
Investors can transfer their investments from a stocks and shares ISA to a cash ISA (or vice versa).
ISAs are allowed to invest in cash (including bank and building society accounts and designated National Savings), stocks and shares (including unit and investment trusts and government securities with at least five years to run) and life assurance.
A recent introduction is the Innovative Finance ISA, for loans arranged via a peer-to-peer (P2P) platform. Peer-to-peer lending is a small but rapidly growing alternative source of finance for individuals and businesses. The Innovative Finance ISA may also invest in debt securities offered via crowdfunding platforms.
What is a flexible ISA?
From 6 April 2016, ISA savers may be able to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for that year where they hold a ‘Flexible ISA’.
Additional ISA allowance for spouses on death
An additional ISA allowance is available for spouses or civil partners when an ISA saver dies. The additional ISA allowance is equal to the value of a deceased person’s accounts at the time of their death and is in addition to the normal ISA subscription limit. There are time limits within which the additional allowance has to be used.
What is the Help to Buy ISA?
The government has introduced the Help to Buy ISA, which provide a tax free savings account for first time buyers wishing to save for a home.
The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.
What is a Lifetime ISA?
A new Lifetime ISA is available from 6 April 2017 for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year and receive a 25% bonus on the contributions from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free.
What is a Junior ISA?
Junior ISAs are available for UK resident children under the age of 18 who do not have a Child Trust Fund account. Junior ISAs are tax advantaged and have many features in common with ISAs. They can be cash or stocks and shares based products. The annual subscription limit for Junior ISA and Child Trust Fund accounts is £4,128 for 2017/18 (£4,080 for 2016/17).
Need investment help?
Please contact us at McDade Roberts if you would like any further information on ISAs or any other form of investments as we our sister company M.R. Financial Services will be happy to help.