ISA's or Individual Savings Accounts, have a very favourable tax status that not everyone is aware of. Before March 2007 there were two types of ISA, a Mini ISA where annually you could deposit £3000 Cash or £4000 in Stocks and Shares and a Maxi ISA where you could deposit £3000 Cash or £7000 in Stocks and Shares. However in the March 2007 budget the 2008/2009 Mini and Maxi ISA's were abolished and anyone who had one noticed that their Mini Cash ISA became a Cash ISA, there Mini Stocks and Shares ISA became a Stocks and Shares ISA, a Maxi had Stocks, Shares and Cash altogether, and people who held one will see that the Cash section is now a Cash ISA and the Stocks and Shares are now in a Stocks and Shares ISA.
The allowance limits were also amended and now the limits are:-
* £3600 for a Cash ISA
* £7200 for a Stocks and Shares ISA
Cash ISA Investment Limits
Your ISA limits are renewed each year and you can only have 1 ISA per year and 1 allowance for example, you have a tax free allowance of £3600 cash, you pay in on the 6th April (the start of your ISA tax year) £3600 in cash into your ISA. Then in November you decide to withdraw £1000 toward the cost of Christmas, but you find that you only needed £200 of it and so in January you go to pay £800 back into your ISA only to be told this is not allowed. Read on for more information on ISA Withdrawals and Transfers.
Stocks and Shares ISA's Investment Limits
If you take out a Stocks and Shares ISA you are able to invest a maximum of £7200 per year, and you have the option as to how to choose the shares for your account.
For example, you may already have in mind shares for particular company in which you would like to invest and these can be placed in a self select isa, though you will need a stockbroker or account manager to manage your account and so you would need to consider any fees that may apply for using a stockbroker.
Another option is that you can choose a unit trust, where stocks and shares have already been chosen for you dependant on a number of factors and risks.
The return on your investments will then depend on how well your chosen shares perform but a huge advantage of a Stocks and Shares ISA is that if your chosen investment performs well and you make a profit on the share price increases, those profits (ie: interest and dividends) will not be subjected to Capital Gains and is actually tax free.
When looking to choose an ISA you will want to consider the interest rate, but make sure that you also consider how long that interest rate is actually valid for as in some cases it can only be a short period, and also look to see what the interest rate will be after any promotional rates have ended.
If you are in doubt as to which option would be best suited to you, then seek financial advice from a professional such as a financial adviser.
Top Tips for Cash ISAs
According to a recent survey, over a quarter of the people questioned believe that they will be able to save a lot more money in the next 12 months than they did in 2009.
This is encouraging news, but.....read more