Individual savings accounts (ISA)
ISA’s are now NISA
Individual Savings Accounts (ISAs) have been available since 1999. However, during the recent Budget, Chancellor, George Osborne, promised to improve the simplicity and flexibility of ISAs. From 1 July 2014, the new ISA, or ‘NISA’, gives better tax breaks than before, plus greater flexibility.
All ISA’s have now become NISA’s, including any ISA’s opened from 6 April 2014 to 30 June 2014.
In what ways do NISA’s vary from ISA’s?
You are now able to invest your full allowance in the stock market, cash or any combination of the two. You are able to transfer existing ISA’s from the stock market into cash, or vice versa
Improved tax efficiency
You can now earn tax efficient interest on cash held within a NISA. Previously, any cash held in The Stock Market part of an ISA was subjected to a 20% charge on interest earned. Cash held in a cash ISA was not subject to this tax.
Generous tax break
The allowance has been increased from £11,880 to £15,000 from the 2014/15 tax year. A couple could therefore save £30,000 this tax year. The total amount which can be paid into the Junior ISA in the 2014/15 tax year has increased from £3,840 to £4,000.
Although this allows a substantial amount of money be sheltered from tax throughout your life, the total value is included in your estate on death. This may be subjected to the 40% Inheritance Tax should your estate be large enough.
Moving your current ISA investments
You now have the flexibility to move your current Stocks & Shares investments into Cash, or the other way around. However, never withdraw sums from the Stocks & Shares account to deposit it in a Cash NISA, or vice versa. It must be done as a transfer. If not, any amount you pay in will count as being a new payment with regards to your annual limit.
Should you have contributed to a Cash or Stocks & Shares ISA since 6 April 2014, you won’t be allowed to open an additional NISA of that type before 6 April 2015. You could however make further payments – to the maximum £15,000 NISA subscription limit – within your existing account(s).
From 1 July 2014, there is increased flexibility in how you can utilise your allowance.
You now have the ability to allocate:
- the entire £15,000 within Stocks & Shares
- the entire £15,000 within Cash
- any amount combined between Stocks & Shares and / or Cash up to the new £15,000 limit
Information and facts are in accordance with our current understanding of taxation legislation and regulation. Any taxation and allowances are subject to change.
The value of, and income from, investments may go down as well as up. You may not get back the original amount you invested.