(N)ISA and easy? Individual Savings Accounts (ISA) – a brief summary
- Cash ISA: 2016/17 limit £15,240; £20,000 from 2017/18.
- Stocks & Shares ISA: as above (can hold Alternative Investment Market [AIM] based investments and gain exemption from inheritance tax after 2 years. AIM investments are high risk).
- Junior ISA (JISA): 2016/17 limit £4,080; cash or stocks and shares types available. For the 2 years aged between 16 and 18 teenagers have available both JISA and ISA allowances. Child Trust Funds: can be rolled into JISAs to access a greater choice of investments and savings.
- Help to buy ISA: After an initial deposit of £1,200, £200 per month is allowed to be saved up to a total of £12,000. Only cash savings allowed. At the time of purchase the government (HMG) will add £1 to every £4 saved.
- Lifetime ISA: To be launched in April 2017, under 40s will be allowed to save £4,000 into either a cash or stocks and shares ISA each year, but forms part of the overall £20,000 limit applicable from then. HMG will contribute 25% to any contribution, but only if the savings are used to buy a house (up to a value of £450K) or if withdrawn after aged 60. HMG’s contribution stops at aged 50. Withdrawals for any other reason triggers the withdrawal of the HMG’s contribution, including growth or interest on it and a 5% charge.
- Innovative ISA: Permit peer to peer (P2P) and crowdfunding investments for those over 18; contributions are limited by the overall ISA allowance. There is no protection available under the Financial Services Compensation Scheme (FSCS) in the event that the P2P platform operator fails.
- On death: If an ISA saver in a marriage or civil partnership dies their surviving spouse or civil partner will inherit an additional ISA allowance equivalent to the value of the deceased’s ISA(s), on top of their usual allowance.
- And finally: Withdrawals of current year subscriptions can now be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule. This facility requires the ISA Manager to have adopted the ‘flexible ISA’ rules.
Author: Paul Newton FPFS, CertPFS (DM), STEP Affiliate, is a Chartered Financial Planner for Castlegate Financial Management Limited, a firm of Independent Financial Advisers and Chartered Financial Planners, authorised and regulated by the Financial Conduct Authority. 8 Castlegate Grantham Lincolnshire. 01476 591022. All statements concerning the tax treatment of ISAs and their benefits are based on my understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change. The value of market linked investments can fall as well as rise; invested capital is not guaranteed and past performance is no guarantee of future returns.