The Individual Savings Accounts (ISA) regime received a something of a shake-up in the Chancellor’s March 2014 Budget.
Firstly, from 1 July 2014 the overall limit on savings for 2014/15 will be increased from £11,880 to £15,000, with the Junior ISA contribution allowance increasing from £3,840 to £4,000 on the same date.
Secondly, and perhaps more importantly, the NISA will also offer the option from 1 July 2014 to save in cash, stocks and shares, or any combination of the two.
However, care will be needed with the timing of investments because, between 6 April 2014 and 30 June 2014, the total amount that you will be able to contribute to a cash ISA is the ‘old’ 2014/15 limit i.e. £5,940. You can also contribute into a stocks and shares ISA in that period, but the combined amount you pay into your cash and stocks and shares ISAs must not exceed £11,880 prior to 1 July 2014.
From 1 July 2014, your existing ISA will automatically become a NISA, and you will be allowed to invest (or top up if you’ve already made contributions) up to the new annual limit of £15,000 – which may then be held in any combination of cash or stocks and shares.
If you intend to invest both before and after this ‘change-over’ date, you should check when contributions can be made with your ISA provider(s) though, particularly if you have a fixed-rate account.
What is particularly important is that, if you want to move your money from one ISA to another ISA or a NISA, you shouldn’t take out the cash to deposit into the new account, because this will be classed as a withdrawal and you will lose all your tax benefits. Instead, you should approach the provider that you wish to transfer the funds to, so that they can arrange the transfer from the old provider. The transfer rules will also differ depending upon when you paid into funds, so you should always check what is possible with your provider.
NISAs, like ISAs, will only be exempt from Income and Capital Gains Tax but not Inheritance Tax (IHT), unless it holds qualifying shares in an Alternative Investment Market (AIM) company, in which case the investments can attract IHT ‘Business Property Relief’. To be qualifying shares, the company must essentially be a trading company (and fulfil many other conditions), and the shares must have been held for 2 years.
The New ISA regime will also allow other types of investments to be held from 1 July 2014 and these may also be of interest – but you should of course always take financial advice, especially if if you are considering investing in these alternative markets, because there may be increased risks with such investments that would not be recommended for your circumstances.
There is no doubt though that NISAs will allow you greater scope and flexibility to invest in the way that suits you best, and within an income and capital gains tax-free environment – so ISAs really have become Nicer!
For further information on any of the above points or to discuss your tax affairs generally, please do not hesitate to contact Robin Beadle.