Moneyspider in the News
01/01/2008
Are you taking full advantage of your ISA tax allowances?
Asks Tony Ahearne, Director of Moneyspider Limited
Mature Times
Individual Savings Accounts (ISAs) were introduced in
1999 to replace Personal Equity Plans (PEPs). When you invest through an ISA,
the income and growth are free of income and capital gains tax and you don't
have to declare an ISA on your tax return.
An ISA is not itself and investment but effectively a
'wrapper' within which an underlying investment is held. ISAs can include one
or two components:
-
Cash (bank and building society savings accounts, National Savings)
-
Stocks and shares (unit trusts, shares, bonds, etc)
Until 5 April 2010 you can pay an overall total of
£7,000 into ISAs each tax year
Maxi and Mini ISAs
There are two types of ISA - Maxi and Mini. In each year
you can either invest in one Maxi ISA, which can include a mixture of cash (up
to £3,000) and stocks and shares, or two Mini ISAs.
There are two types of Mini ISA - a cash ISA, and a
stocks and shares ISA. You can open each ISA with a different ISA manager if
you wish and you can invest up to £3,000 in a cash ISA and up to £4,000 in a
stocks and shares ISA, but you cannot open more than one of each type in the
same tax year. And you cannot invest in both a Mini ISA and a Maxi ISA in the
same tax year.
What are the benefits of ISAs?
There are several reasons to invest within an ISA:
-
You pay no tax on any of the income you receive. This includes dividends,
interest and bonuses.
-
You pay no tax on capital gains arising on your ISA investments
-
ISAs do not have to be mentioned on your self-assessment tax return.
For those hovering on the threshold between one tax
band and another, investing within an ISA could make the difference between
falling into the higher rate band or not, as income from an ISA is not included
by the Inland Revenue in tax band calculations.
For those over 65, income received from investments
held within an ISA does not erode the higher personal tax allowance they
receive.
For higher rate taxpayers, dividends received from
investments held within an ISA are not liable to the additional 25% tax levied
on the net amount of dividends received from other investments.
PEP and PEP/ISA transfers
PEPs, like ISAs, can be used as a 'wrapper' for a
range of investments, and now have the same tax benefits as ISAs. You can no
longer take out a new PEP, which also means you can't subscribe new money into
existing PEPs. However, if you already have a PEP you can transfer the
investment to another PEP provider, or switch investments within the wrapper.
If you have accumulated a number of PEPs and ISAs
investments over the years, it is important to review their performance
regularly as:
-
Your investment needs may have changed
-
The funds that you have invested in may not have performed well
Prior to 6 April 2004 dividends paid on UK company
shares held within an ISA received a tax credit of 10% - which was passed on to
the investor by the plan manager. So, for every £90 dividend the investor
actually received £100. The repayable dividend tax credit was abolished in
April 2004.
New rules to simplify ISAs will come into force in
April 2008. The reforms will the distinction between maxi and mini ISAs and
allow transfers from a previous year's cash ISA into a stocks and shares
version. Investors who still hold PEPs will be able to transfer their money
into an ISA wrapper, and children with child trusts will be able to roll over
their investments into an ISA on their 18th Birthday.
As well as simplifying the rules, the reforms will
also make ISAs a permanent fixture of the savings landscape, with the
government pledging that the maximum annual investment will always be at least
£7,000.
Get the facts from Moneyspider
Moneyspider enables you to see at a
glance how your ISAs, PEPs and Unit Trusts are performing; what they're
actually worth; how they're rated and crucially how they compare with other
funds. Something your Fund Manager will never tell you!
Moneyspider's sophisticated but easy to
understand performance rating system covers all 2,000 or so Unit Trusts and
OEICs (inc. ISAs and PEPs) available to UK investors. Those who register with
Moneyspider will receive a personalised online report and valuation, updated
daily, showing how each of their funds has performed over 1, 3 and 5 years.
Moneyspider also provides a comparison with other funds and each of your funds
will receive the unique Moneyspider Rating® ranging
from A to E.
Registration is free and quick and you will never be
asked for any money. When you register with Moneyspider,
they don't move your funds or change your investments in any way. Your
investments remain as they are in the same funds with the same fund managers.
Moneyspider Limited is an appointed representative
of Anthony, Bryant and Company (Investment Consultants) Limited which is
authorised and regulated by the FSA.
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