Whether you are looking to set up an ISA for the first time or have past experience, our up-to-date summary of what’s out there could prove helpful. Nutmeg.com is the UK’s first online discretionary investment management company and can help you make the most of your ISA allowance. Meanwhile, you can read about the new rules for couples and find more useful information about ISAs in this guide below.
Let’s see what’s available…
The limit for cash ISA and Stock & Shares ISA for the tax year ending 5 April 2015 is £15,000. The limit for the next tax year, ending 5 April 2016, has been set at £15,240. Parents or guardians can also accrue a savings pot for their children via a Junior Individual Savings Account (JISA), and a £4,080 limit will apply come 6 April 2015. HMRC set these total annual ISA limits every year and stipulate that savers only have one cash ISA and one Stocks & Shares ISA per annum.
Recent changes
The Government announced further changes to ISAs (or NISAs, short for New ISA, as they are now also known) in the recent 2014 Autumn Statement. This development means spouses and civil partners can now inherit tax-free income from their husband’s or wife’s ISA. The rule change could make ISAs a more attractive way for millions of people to go about growing their savings and striving to reach their financial goals.
Flexible choices: Cash Saving / Stocks & Shares
With a cash ISA, savers are given a fixed rate of interest on the money they deposit. Greater returns on your investment can be possible with a Stocks & Shares ISA, though there is an element of risk associated with the investment. Have you considered taking a combined approach to your ISA investment? You can use all of your allowance on a Cash or a Stocks & Shares ISA, or split the limit across a combination of the two. The flexibility to choose Cash and Stocks & Shares ISAs has been well-received by some, reports MoneyObserver.
“This is great news for Britain’s savers,” said Nationwide chief executive, Graham Beale.
“It will reduce confusion on the differing amounts which could be saved in cash and stocks and shares and more importantly give people more flexibility to earn tax-free interest.’
Couples’ “tax perk”
A widowed spouse or civil partner has the right to transfer an existing ISA into their name, under latest Government changes that apply from 6 April 2015. This new rule was announced by George Osborne in the December Budget and means the value of existing ISAs can be inherited tax free. This could see around 150,000 ISAs inherited each year, based on the Chancellor’s estimates and reported by The Financial Times.
If you’re an ISA newbie or were still on the fence about how to save and invest, the new rules for couples could be just what you were waiting to hear.
Your money: the ins and outs
HMRC rules prohibit savers putting more than your annual allowance into ISAs but you can save and invest more than that amount outside of the ISA tax-wrapper. And, of course, you can use your full allowance each year. It’s important to note that the cap applies even if you make a withdrawal from your ISA pot during the year. The good news is that if the investments held within your ISA return a profit, HMRC demand no capital gains tax. Your money is contained within the tax wrapper, which can enable your savings pot to swell over time.