ISA's - Quick FAQ's
What is an ISA and how much can I invest?
What investments can I hold inside an ISA?
What is the difference between a Mini and a Maxi ISA?
What is the Tax position of ISA’s?
What are the advantages of investing in the Stocks & Shares part of an ISA?
What is the minimum investment period of an ISA?
What should I do now if I want to Invest in an ISA?
What is an ISA and how much can I invest?
An ISA is basically a form of tax efficient wrapper in which you can place investments to give them tax efficient status.
Your total annual subscription limit to an ISA is £7,200 per tax year, of which a maximum of £3,600 can be held in cash.
With effect from October 2009, for people the ISA allowance for the over 50's is increasing to £10,200, restricted to £5,100 being held in cash. The new ISA allowance will apply to all eligible ISA investors from April 2010.
What investments can I hold inside an ISA?
Subject to the overall limits, you can split your ISA between the following components:
A. STOCKS AND SHARES
You are able to hold stocks and shares and managed investment funds within an ISA.
It is possible to invest up to £7,200 into stocks and shares inside an ISA in the tax year 08/09.
B. CASH
You have the option of holding a proportion of your ISA allowance in cash, which will earn tax-free interest. You are able to deposit £3,600 in cash in the tax year 08/09.
What are the differences between a Mini and a Maxi ISA?
Since April 2008, the distinction between mini and maxi ISA's is now technically incorrect. However, over the past 9 years, many people have used their ISA allowances by splitting the amount they have invested in this way so we have decided to keep the explanation intact for the foreseeable future for reference purposes,(please see below).
From April 2008, you can invest up to £7,200 into an ISA of which no more than £3,600 can be held in cash.
For this reason many people now hold their cash ISA allowance with a bank or building society paying a competitive rate for up to £3,600 and if wanting to use the whole of their annual ISA allowance invest the remaining £3,600 in to a stocks and shares based ISA with a separate provider.
As long as you do not exceed the maximum cash allowance of £3,600 or your total ISA allowance of £7,200 per tax year, you can now split your ISA investments much more flexibly.
As an example, if you wanted to invest just £1,700 in to a cash ISA and £5,500 in to Stocks and Shares, this is now acceptable.
The maximum contribution limits are shown in the following table:
ISA Allowances - April 2008 onwards |
Total Allowance |
Investment (Stocks & Shares) |
£7,200
(less any amount invested into cash as detailed below) |
| Cash | up to £3,600 max cash allowance |
IMPORTANT NOTE :- With effect from October 2009, for people aged over 55 the allowance is increasing to £10,200, restricted to £5,100 being held in cash. The new ISA allowance will apply to all individuals from April 2010.
The Old Day's - Mini and Maxi ISA's
The Maxi ISA - April 1999 to April 2008
One ISA provider managed the Maxi ISA. It had to offer the stocks and shares component but could also offer cash. If you wish to invest your full ISA allowance in stocks and shares, you could only do so through a Maxi ISA as the maximum that could be invested in a Mini ISA stocks and shares ISA component was £4000 per year.
The Mini ISA - April 1999 to April 2008
The Mini ISA was only allowed to hold one of the two components (shares or cash). For this reason, many investors would tend to invest the two components separately, with different providers. This meant that they would often end up with two Mini ISA's in a tax year rather than one Maxi ISA.
What is the Tax position of ISA’s?
Investments are free from capital gains tax, however, investors will no longer receive a 10% tax credit on dividends from UK equities as this has been totally removed from April 2004, meaning that such dividends will be fully taxable from this date, although there will be no further tax liabilities, even for higher rate taxpayers. However, investments in corporate bonds and gilts are free from tax and are able to reclaim the full 20% tax credit.
What are the advantages of investing in the Stocks and Shares part of an ISA?
The stocks and shares element of the ISA will allow you to take advantage of the pooled resources and broad spread of risk offered by a collective investment that brings together the shares of many companies. The stocks and shares element can be invested in most unit trusts, investment trusts and OEICS.
These will usually be actively managed by a professional fund manger who will buy and sell shares on your behalf, with the aim of achieving the maximum possible return on your investment. In the past, over the medium to long term, this type of investment has produced an excellent level of growth, although it is important to remember that past performance is no guarantee for the future, and the value of such investments can fall as well as rise.
What is the minimum investment period of an ISA?
Many ISA's do not have a minimum investment period, however, it is important to remember that any investment in stocks and shares should be considered as a medium to long term investment. It is also important to consider any costs or penalties that may be imposed by different providers should you wish to surrender or cash in your ISA.
What should I do now if I want to Invest in an ISA?
If you would like to look further into investing into an ISA, you can contact us at info@money-minder.com or call us on 0845 218 9194 between 8am and 8pm Monday to Friday and 10 am to 2pm on Saturdays when we will be happy to discuss your requirements further.
We are able to offer a full independent financial advice service and recommend appropriate solutions to your needs that will take account of your personal financial circumstances.