ISA Allowance 2015/16

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ISA Individual Savings Account 2011/12 tax yearWe are now well into the 2015/16 tax year and there are a few changes to ISAs which you need to be made aware of….

The ISA allowance has increased to £15,240 per investor and this applies to both Cash ISAs (over 16s) and Stocks and Shares ISAs (over 18s). You can invest in one Cash ISA and one Stocks and Shares ISA per tax tear and the total allowance of £15,240 can be split between the two types of ISA as you choose.

Previously you were able to transfer between ISA providers and Cash ISAs could be transferred into Stocks and Shares ISAs. Now, you can also transfer the other way – FROM Stocks and Shares ISAs TO Cash ISAs.

And finally, under new rules, your ISA allowance, if your married, does not die with you as was the previous case. Now, on death, your spouse or civil partner can inherit your ISA allowance.

 

ISA Allowance 2013/14 – until 5th April 2014

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Take a paycut and invest in your own financial futureThe current tax year ends on 5th April 2014 and until midnight you can invest up to £11,520 into a Stocks and Shares ISA. This can either be direct with a fund management house or via an investment platform, fund supermarket or wrap provider.

For those who are keen to manage their own portfolios there are a huge range of funds, shares and other investment classes to choose from to benefit from a more favourable tax treatment of income and capital gains tax, in the investors hands.

Alternatively, if you’re not so investment-savvy and wish to receive advice and guidance, please consult an Independent Financial Adviser.

If Stocks and Shares ISAs are not for you, due to the investment risks involved, you can still invest up to £5,760 into a Cash ISA. These are available from many banks, building societies and other institutions. They are quite simply bank account which pay your interest without any tax deducted.

Hope this helps!

ISAs – the basics – 2011/12 tax year

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ISA Individual Savings Account 2011/12 tax yearHere’s a brief overview of ISAs (Individual Savings Accounts) – what you can and cannot do with them in the current 2011/12 tax year which ends on 5th April 2012.

What is an ISA?

An ISA (Individual Savings Account) is a tax-efficient form of saving or investment. It is tax-efficient in terms of income and capital gains tax. The actual rules are beyond the scope of this quick article but check the HMRC website for more info if needed. Basically, the are tax free in terms of income and capital gains taxes in your hands.

An ISA will be included in calculating your Estate value for probate and inheritance tax purposes.

What different types of ISA are there?

There are two types of ISA:

1. Cash ISA – a savings or deposit account on which interest is paid tax-free.

2. Stocks and Shares ISA – this is a an ISA which invests (normally through the investors own choice) in mutual funds (collection of shares managed by a fund manager) or directly into individual company shares.

Self-select ISAs allow you to choose your own funds and/or shares. Seek advice from an Independent Financial Adviser (IFA) if you’re not sure where to invest.

Investment Limits

Basically…..

1. Up to £10,680 in a Stocks and Shares ISA.

OR

2. Up to £5,340 can be invested in a Cash ISA with any unused allowance being available for a Stocks and Shares ISA. E.g. if you put £2,000 into a Cash ISA you can still put £8,680 into a Stocks and Shares ISA.

Can I Transfer from one ISA provider to another?

Yes – approach the company to whom you wish to transfer to arrange this. Under no circumstances surrender the ISA in order to reinvest it. To retain its tax-efficient status, the transfer must be conducted by the plan managers – you will lose the tax-efficient benefits if you surrender an existing ISA 🙁

If I transfer an “old” ISA does this use my current years’ ISA allowance?

No – each individual has a new personal ISA allowance on 6th April each tax year, regardless of any previous ISA investment they may have made.

Can a husband and wife have their own ISA’s?

Yes, everyone aged over 18 has there own personal ISA allowance. It is currently £10,680 for the 2011/12 tax year. Joint ISAs are not allowed.

If I take out a Cash ISA and a Stocks and Shares ISA do they have to be with the same provider?

No. You can have a Cash ISA with your bank or building society AND a Stocks and Shares ISA with a separate investment house.

Is there any risk involved?

Cash ISA – generally no – if the bank or building society were to “default” then you should be covered by the Financial Services Compensation Scheme (FSCS). In terms of returns, there is no volatility involved as this is purely a deposit/bank account.

Stocks and Shares ISA – these do carry risk – the level of risk will depend on the fund(s) you invest in – some funds are risker than others and many investors like to have a spread of funds from different fund management companies and in different geographical sectors (e.g. UK. Europe, Far East etc…) or asset classes (technology, gold, oil etc…)

More information on the compensation schemes can be found at FSCS – please note you cannot claim on the FSCS if your plan simply falls in value due to poor fund choice or investment market conditions!!!

If you have any comments or questions please let me know in the comments section below.

Remember though – we don’t give financial advice on this site!

ISA Allowances 2011/12 Tax Year

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At midnight tonight the new 2011/12 tax year starts!

ISA allowances are increasing from £10,200 to £10,680.

Of this £10,680, up to £5,340 can be invested in a Cash ISA, and any unused allowance between the amount you put into a Cash ISA and the overall allowance of £10,680 can be invested in a Stocks and Shares ISA.

For example, invest £2,000 in a Cash ISA from midnight tonight and you can still invest up to £8,680 into a Stocks and Shares ISA.

If you can afford to invest on a monthly basis, to benefit from pound cost averaging, the maximum each month (assuming 12 payments) is £890.

Any questions, add them below and I’ll answer them for you.

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ISAs – the basics – 2010/11 tax year

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It’s that time of year again – as the end of another tax year approaches on 5th April we are now well and truly into “ISA Season”!

Here’s a brief overview of ISAs for those new to this form of savings/investment, as well as for those who may have a few queries they need answers to.

What is an ISA?

An ISA (Individual Savings Account) is a tax-efficient form of saving or investment. It is tax-efficient in terms of income and capital gains tax. The actual rules are beyond the scope of this quick article but check the HMRC website for more info if needed.

An ISA will be included in calculating your Estate value for probate and inheritance tax purposes.

What different types of ISA are there?

There are two types of ISA:

1. Cash ISA – a savings or deposit account on which interest is paid tax-free.

2. Stocks and Shares ISA – this is a an ISA which invests (normally through the investors own choice) in mutual funds (collection of shares managed by a fund manager) or directly into individual company shares.

Self-select ISA’s allow you to choose your own funds and/or shares. If you don’t feel confident enough to make your own fund choice then consult an Independent Financial Adviser.

Investment Limits

Basically…..

1. Up to £10,200 in a Stocks and Shares ISA.

OR

2. Up to £5,100 can be invested in a Cash ISA with any unused allowance being available for a Stocks and Shares ISA. E.g. if you put £3,000 into a Cash ISA you can still put £7,200 into a Stocks and Shares ISA.

Can I Transfer from one ISA provider to another?

Yes – approach the company to whom you wish to transfer to arrange this. Under no circumstances surrender the ISA in order to reinvest it – the transfer must be conducted by the plan managers – you will lose the tax-efficient benefits if you surrender an existing ISA!!!

If I transfer an “old” ISA does this use my current years ISA allowance?

No

Can a husband and wife have their own ISA’s?

Yes, everyone aged over 18 has there own personal ISA allowance. It is currently £10,200 and this is increasing to £10,680 next year from 6th April.

If I take out a Cash ISA and a Stocks and Shares ISA do they have to be with the same provider?

No. You can have a Cash ISA with your bank or building society AND a Stocks and Shares ISA with a separate investment house.

Is there any risk involved?

Cash ISA – generally no – if the bank or building society were to “default” then you should be covered by the Financial Services Compensation Scheme (FSCS). In terms of returns, there is no volatility involved as this is purely a deposit/bank account.

Stocks and Shares ISA – these do carry risk – the level of risk will depend on the fund(s) you invest in – some funds are risker than others and many investors like to have a spread of funds from different fund management companies and in different geographical sectors (e.g. UK. Europe, Far East etc…) or asset classes (technology, gold, oil etc…)

More information on the compensation schemes can be found at FSCS – please note you cannot claim on the FSCS if your plan simply falls in value due to poor fund choice or investment market conditions!!!

If you have any comments or questions please let me know in the comments section below.

Remember though – we don’t give financial advice on this site!

ISA’s for Children – an introduction

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The Government has announced that a “Junior ISA” for children will be launched to replace the previous “child trust funds” which have been scrapped.

The new “Junior ISA’s” are likely to come into force in Autumn 2011 and information on them is limited at present.

The new ISA will be a simple and tax-free way for parents to save for a child’s future – the only difference being here that there will be no contribution made from the public purse!

It is understood the ISA will pass to the child on reaching 18 so could be a good way to build a tax-efficient fund for, say, university funding, house purchase or buying a home.

Remember: everyone has a personal income tax allowance – even children. For the 2010-11 tax year it is £6,475 – so if your children currently earn interest on their savings accounts (and their income from all sources if below £6,475) then they can register to receive their savings account interest paid gross with no tax deducted – here’s an article I wrote on this issue previously.

The details are to be confirmed soon but I would expect that a Junior ISA can be rolled over into an “adult” ISA once the child reaches 18 – it’s going to be a case of “use it or lose it”.

Subscribe to my free newsletter to be kept informed on developments in this area.

ISA’s – the basics – 2009/2010 tax year

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We get many enquiries asking about the different rules relating to ISA’s (Individual Savings Accounts) so I thought I would put together a quick article detailing the main points. There are many other articles on ISA’s elsewhere on shrewdcookie.com.

 

 

 

 

 

 

What is an ISA?

An ISA (Individual Savings Account) is a tax-efficient form of investment. It is tax-efficient in terms of there being no liability to income tax on any income received or capital gains tax on any gains you make.

An ISA will be included in calculating your Estate value for probate and inheritance tax purposes.

What different types of ISA are there?

There are two types of ISA:

1. Cash ISA – this is a savings/deposit account on which interest is paid tax-free.

2. Stocks and Shares ISA – this is an ISA which invests in a fund(s) which themselves invest in stocks and shares.

There are thousands of funds to choose from. Self-select ISA’s allow you to choose your own investment funds. An ISA through an IFA or other adviser can also be invested in if you are not happy to choose your own investment funds.

How much can I invest?

This depends on your age – if you’re going to be 50 or over before 5th April 2010 then you can invest:

1. Up to £10,200 in a Stocks and Shares ISA.
2. Of this £10,200 limit, up to £5,100 can be invested in a Cash ISA (with any unused allowance being available for a Stocks and Shares ISA). E.g. if you put £4,000 into a Cash ISA you can put £6,200 into a Stocks and Shares ISA.

If you’re aged below 50 then you can invest the following:

1. Up to £7,200 in a Stocks and Shares ISA.
2. Of this £7,200 limit, up to £3,600 can be invested in a Cash ISA (with any unused allowance being available for a Stocks and Shares ISA).

After 6th April 2010 everyone can invest up to the £10,200 limit.

Can I Transfer from one ISA provider to another?

Yes – approach the company to whom you wish to transfer to arrange this. Under no circumstances surrender the ISA – you will lose the tax-efficient benefits!

The ISA must be transferred between the providers.

If I transfer an “old” ISA does this use my current years ISA allowance?

No

Can a husband and wife have their own ISA’s?

Yes, everyone aged over 18 has there own personal ISA allowance.

If I take out a Cash ISA and a Stocks and Shares ISA do they have to be with the same provider?

No. You can have a Cash ISA with your bank or building society AND a Stocks and Shares ISA with a separate investment house.

Is there any risk involved?

Cash ISA – generally no – if the bank or building society were to go into “default” then you should be covered by the Financial Services Compensation Scheme (FSCS). In terms of returns, there is no volatility involved as this is purely a deposit/bank account.

Stocks and Shares ISA – these do carry risk – the level of risk will depend on the fund you invest in – some funds are riskier than others. With Stocks and Shares ISA’s you should ideally be investing for the medium to long term (minimum 5 years, preferably 10+). The value of the underlying shares can fall as well as rise, as has been seen over the last few years in the UK and world stock markets.

More information on the compensation schemes can be found at FSCS – please note you cannot claim on the FSCS if your plan falls in value!!!

If you have any comments or questions please let me know in the comments section below.

Remember though – we don’t give financial advice on this site!

Why a falling stock market isn’t always a bad thing!

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The one time when a falling stock market is NOT a good thing is when you want to take money out of the market in the near future – your portfolio can move horrendously against you within a matter of weeks if not days.

There is, however, a time when a falling stock market is a GOOD thing – that’s when you’re actually putting money into the market (as I have been doing over the last couple of years).

Now I’m not saying now is the right time for YOU to invest in the stock market – we all have our own reasons for investing (or not, as the case may be). My investment strategy, time horizons, attitude to investment risk etc will probably be different to almost everyone else’s so the actions I take may not be the actions which you should take!

The stock market performed a fantastic turnaround in 2009, with the FTSE100 rising from 4,434.20 at close of trading on 31st December 2008 to 5,412.9 at close of trading on 31st December 2009 – an increase in the FTSE100 of 22.1% during 2009.

Who knows where it will go next?!

Well, anyway, as part of my broader portfolio, I bought some shares in December in Tullow Oil (TLW.L) which is an oil drilling and exploration  company with interests in the African continent as well as other geographical areas. At the time I bought them, their shares stood at £12.99 per share. I had £1,000.00 to invest and therefore was able to purchase 76 shares back in December.

There has been a certain amount of volatility in the stock market recently and today I noticed that their share price had in fact dropped to £11.62 per share – a fall of £1.37 per share or 10.55% compared to what I paid for my shares back in December.

Now many people would be unhappy about this – not me! I saw it as a buying opportunity. I therefore decided to purchase another £1,000 worth this morning.

I am in this for the long run and will possibly hold these shares for in excess of 5-10 years so I took advantage of the recent fall in price to add more shares to my portfolio and benefit from pound cost averaging.

So what does all this mean? Well, I was able today to buy these shares at £1.37 per share less than I paid for them in December. I have drawn up a spreadsheet to demonstrate the benefit to me of this course of action.

 

 

I have included the dealing costs and stamp duty (0.5% on purchases) to take full account of the trading situation. You can see from row 1 that the total cost of my purchase of 76 shares in December was £1,007.28 giving a total acquisition cost per share of £13.25. Today I bought 86 shares at £11.63 and row 2 shows the total acquisition cost of £1,019.12 or £11.85 per share. So my purchase today cost me £1.40 per share less than in December.

Now here’s the interesting bit!!!

The second half of the spreadsheet answers the question “at what price per share do I have to sell to get my money back and break-even?”

Row 1 shows that had I not bought those shares today then to recoup the £1,007.28 outlaid in December, together with the £14.95 dealing charge to sell, I would need the Tullow Oil share price to hit £13.45 (last column) – this is the break-even price for my holding as it stood prior to today’s purchase.

Now consider the next row down – because I was able to reduce the average buying cost of my two lots of shares in Tullow down to £12.51 i have “pound cost averaged” down the cost of this holding in my portfolio.

The second row shows that to recover £2,026.40 (total cost of both the purchases in December and today) together with dealing charges of £19.95 (next tier of dealing charges) I would need to sell the shares for a minimum of £12.63 per share.

So in summary, had I only bought the December shares I would need Tullow Oil share price to hit £13.45 to break even.

Now with today’s “cheaper” shares I have reduced this break-even share price down to £12.63 per share – 82 pence per share lower. In effect, each and every penny that the Tullow Oil price rises over and above £12.63 is profit to me!

This therefore gives me scope for larger gains at a later date when I ultimately sell this holding.

If the price drops even further I will consider whether to invest further funds to reduce my break-even price even further.

Warning!

This is not a recommendation to buy shares in Tullow Oil or indeed that share ownership is suitable for YOU! The value of shares and the income from them can fall as well as rise and if the company went bust I could lose all my money. Do not act on this article without first taking suitable advice from a qualified stockbroker or financial adviser. You have been warned!!

New ISA Rules – October 2009

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Well ISA day has finally arrived and the contribution limits increase today for those people aged over 50 before 5th April 2010.

What is the current ISA position?

Anyone aged over 18 in the current tax year is allowed to contribute up to £7,200 to a Stocks and Shares ISA. If they choose, they can use up to £3,600 of this allowance to contribute towards a Cash ISA.

Any unused allowance after making contribution to a Cash ISA can be invested in a Stocks and Shares ISA.

For example, if someone currently places £2,000 into a Cash ISA, before the end of the tax year on 5th April they can either invest an additional £1,600 into their Cash ISA, and invest £3,600 into a Stocks and Shares ISA. Or alternatively, they could leave just £2,000 invested in the Cash ISA and invest £5,200 into a Stocks and Shares ISA.

What is changing on 6th October 2009?

The annual allowance for anyone aged 50 or over before the end of the current tax year is having their ISA allowance increased to £10,200. Of this £10,200 allowance up to £5,100 can be invested in a Cash ISA.

What about for those aged under 50?

For under 50’s their ISA allowance will remain at £7,200 for the rest of the current tax year and their allowance will increase on 6th April 2010 to £10,200 in line with the over 50’s allowance.