ISA clinic
Don’t lose your 2008/09 ISA allowance

With the arrival of the New Year comes the countdown to the Individual Savings Account (ISA) deadline on 5 April. If you haven’t already used your 2008/09 ISA allowance, now is the time to talk to us and consider your options.

Alternatively, if you are new to ISAs, here’s an overview.

ISAs are tax-free savings accounts that do not have to be declared for income or capital gains tax purposes to HM Revenue & Customs (HMRC). Individuals can save up to £7,200 in this financial year, a financial year runs from 6 April until 5 April the following year.

Different types of ISAs
There are currently two types of ISA, a Maxi ISA and Mini ISA. An individual can only subscribe or contribute to either one Maxi ISA or up to two Mini ISAs (one for each component), each tax year. Money cannot be invested in both a Mini and Maxi ISA in the same financial year.

From 6 April 2008 the Mini and Maxi distinction will be removed. After this date an individual will be able to subscribe to either a cash ISA (maximum £3,600), a stocks and shares ISA or both.

Cash component
This component allows individuals to invest in building society deposits, UK and European authorised bank deposits, cash unit trusts or national savings. Individuals as young as 16 years are permitted to open either a Mini cash ISA or the cash component of a Maxi ISA.

Stocks and shares component
This component allows individuals to invest in collective shares, for example, unit trusts, investment unit trusts, shares listed on a recognised stock exchange, bonds and gilts and life assurance.

Mini ISA
There are two types of Mini ISA – a cash ISA, and a stocks and shares ISA. You could open each ISA with a different ISA manager. The amount you can invest in each tax year (6 April to 5 April) is fixed. You can currently invest up to:

£3,600 in a cash ISA, and
£3,600 in a stocks and shares ISA
You cannot invest in more than one Mini cash ISA, or more than one Mini stocks and shares ISA in the same tax year.

Maxi ISA
A Maxi ISA can include both cash and stocks and shares. However, whichever way your investment is split, it counts as one Maxi ISA. So you can only open one Maxi ISA in each tax year. The total amount you can invest is £7,200 in the current tax year. You can invest up to £3,000 of this in the cash element.

Who can open an account?
To open an ISA, you must be 18 years old or over, with this exception, individuals as young as 16 years are permitted to open either a Mini cash ISA or the cash component of a Maxi ISA.

Individuals must be UK residents for tax purposes. People working abroad or spouses and registered civil partners of individuals working abroad, for example civil servants or armed forces who are paid by the British government, are also entitled to open an ISA.

ISAs cannot be held as joint accounts or on behalf of other individuals.

Tax benefits of ISAs
No tax is paid on the income you receive from your ISA savings and investments

No tax is paid on capital gains arising from your investments

You do not have to tell HMRC about income and capital gains from ISA savings and investments.

Transferring an ISA
You can transfer your ISA to another ISA manager. The type of ISA must be the same. For example, you cannot move funds from a cash ISA with one manager to a stocks and shares

ISA with another.
Your ISA must be transferred directly between your existing ISA manager and the new one.

You cannot arrange a transfer yourself by closing the first ISA and paying the money to another ISA manager.

Need more information? Please email or contact us with your enquiry.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Levels and bases of, and reliefs from, taxation are subject to change.

Prior Knowledge is an appointed representative of Sesame Ltd. The site is intended for UK consumers only. Principal: A Prior