New ISA rules - everything you need to know
From 6 April 2008, ISA rules are changing. The new rules aim to make ISAs easier to manage and understand. Whether you already hold an ISA, or are looking to invest in one, take a look below to see what the changes could mean for you.
- The maximum total annual contribution will increase from £7,000 to £7,200, so you can save a little more each year, tax free.
- The maximum allowable cash portion will rise from £3,000 to £3,600.
- The mini and maxi ISA distinction will no longer exist. Any maxi or mini ISA will simply be called an ISA.
- Mini stocks and shares ISAs and any stocks and shares component of a maxi ISA will become a stocks and shares ISA.
- Mini cash ISAs and any cash component of a maxi ISA will become a cash ISA.
- The full £7,200 allowance can be invested in stocks and shares, or you can choose up to £3,600 into a cash ISA.
For example; you save £1,200 in a cash ISA at the start of the tax year. In the same year, you could invest up to another £2,400 in the same cash ISA or up to £6,000 in a stocks and shares ISA with either the same or a different provider. - For the first time, funds will be transferable from a cash ISA into a stocks and shares ISA, giving your money a better chance to grow over the medium to long term. Making the transfer won’t affect your ISA allowance, so if you make a transfer from a previous year’s ISA, it will not use any of the current year’s allowance. In addition, there will be no tax to pay on the returns you earn from your ISA. However you cannot transfer from a stocks and shares ISA to a cash ISA.
- PEPs (Personal Equity Plans) will automatically become stocks and shares ISAs.
Remember that the way the government treats tax on ISAs may change in the future and the value of the tax advantage will depend on individual circumstances.
