ISA Individual Savings Account FAQ26th January 2008
What is an ISA?
An ISA is a savings account where you do not have to pay any Income or Capital Gains Tax. ISAs were introduced on the 6th of April 1999, and was a replacement for PEPs and TESSAs.
How much can I save in an ISA?
There is an annual limit of how much money you can invest in an ISA, with the limit for 2007/08 being set at £7000, and for 2008/09 set at £7200.
You can invest in both a Cash and Stocks and Shares ISA, although both have an investment limit, and the combination of both ISAs can not exceed the maximum limit for that tax year
| Tax Year | Max Cash ISA Allowance | Max Stocks & Shares ISA Allowance | Max Total Allowance |
|---|---|---|---|
| 2008/09 | £3600 | £7200 | £7200 |
| 2007/08 | £3000 | £7000 | £7000 |
What is a Cash ISA?
Cash ISAs are simply a savings account where you do not pay tax on the the interest you earn. Normally basic rate tax payers pay 20% tax on bank interest and higher rate taxpayers 40%.
What is a Stocks & Shares ISA?
Stocks and share ISAs are where you money is placed into pooled investments such as unit trusts and investment trusts or into individual stocks. Any profits made from share price increases aren't eligible for capital gains tax and any tax on the bonds can be reclaimed.
When does the tax year begin?
The tax year begins on April 6th
Can I transfer my ISA?
You can switch to a different manager, you must however transfer all the money you have invested in the current tax year and you cannot switch from a mini to a maxi ISA, or vice versa.
Can I open an ISA on behalf of my child?
No, you cannot open an ISA on behalf of anyone else. You must be at least 16 to open a Cash ISA, and 18 to open a Stocks & Shares ISA.
What's the difference between Mini and Maxi ISAs?
With a Maxi, both Cash and Stocks/Shares ISAs must be held with the same manager, whereas with Mini ISAs you can hold cash ISA with one manager and your stocks & shares ISA somewhere else.
In 2008 the distinction between Maxi and Mini ISAs will no longer exist, with us being left simply with Cash and Stocks & Shares ISAs
Will ISAs be available indefinitely?
Originally the ISA scheme was planned to run till 2009, but it has now been announced that they will remain available indefinably.
Will ISAs replace PEPs?
All Personal Equity Plan (PEP) accounts will automatically become Stocks and Shares ISAs on 6 April 2008.