ISA allowances

From 6th April 2010 the new ISA rules are

• The annual ISA investment allowance will be raised to £10,200. Up to £5,100 of that allowance can be saved in cash with one provider. The remainder of the £10,200 can be invested in stocks and shares with either the same or a different provider.
• ISA savers will be able to invest in two separate ISAs each tax year; a cash ISA and a stocks and shares ISA. Mini and Maxi ISAs no longer exist.
• Mini cash ISAs, TESSA-only ISAs (TOISAs) and the cash component of a Maxi ISA have automatically become cash ISAs.
• Mini stocks and shares ISAs and the stocks and shares component of a Maxi ISA have automatically become stocks and shares ISAs.
• All Personal Equity Plans (PEPs) have automatically become stocks and shares ISAs
• ISA savers will be able to transfer money saved in their cash ISA to their stocks and shares ISA

You can put money in and take it out whenever you want, subject to the terms of your specific ISA. You do not even have to tell your Inland Revenue office that you have an ISA
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The ISA scheme provides different ways of saving to meet people's different needs. You can plan for the short term, or put your money away for much longer.

There are two ways - called 'components' - in which your money can be invested: 'cash' and 'stocks and shares' (both of which can include some specially designed life insurance policies).

• Cash ISAs may be suitable for short-term savings, so that you can get at your money easily.
• Stocks and shares ISAs may be appropriate if you can afford to leave your money untouched for longer than, say, five years. However, your investment may go down in value as well as up and there are no guarantees that you will make a profit. This component can include life insurance which is also for long-term saving and offers some built-in life cover in the case of your death. Again, there are no guarantees that you will make a profit and you may get back less than you put in, particularly if you take your money out after only a few years. However, some types of policy, including 'with profits' policies, are designed to iron out the ups and downs of the stock market.

Whether you choose a Cash or Stocks and Shares ISA in any year is up to you, but remember

• You pay no tax on any of the income you receive from your ISA savings and investments. This includes dividends, interest and bonuses.
• You pay no tax on capital gains arising on your ISA investments (losses on ISA investments cannot be allowed for Capital Gains Tax purposes against capital gains outside your ISA).
• You can take your money out at any time without losing tax relief.
• You do not have to declare income and capital gains from ISA savings and investments or even tell your Inland Revenue office that you have an ISA

If you would like advice in choosing an appropriate ISA please contact us