Providing you with increased simplicity and greater flexibility……
Individual Savings Accounts (ISAs) have been around since 1999, providing a tax-efficient wrapper for savings and investments. However, in the recent Budget, the Chancellor, George Osborne, promised to increase the simplicity and flexibility of ISAs. As of 1 July 2014, there is now a single ISA which has been named the new ISA, or ‘NISA’, which provides a bigger tax break than ever before and more flexibility about how it can be used.
All ISAs have now become NISAs, including any ISAs opened from 6 April 2014 to 30 June 2014.
How do NISAs differ from ISAs?
Greater flexibility – You can invest your whole allowance in stocks and shares or cash, or any mixture of the two.
Freedom to transfer – You can transfer existing ISAs from stocks and shares into cash, or the other way around.
Improved tax efficiency – You can now earn tax-efficient interest on cash held in a NISA. Previously, with the exception of a Cash ISA, any cash held within the stocks and shares element of an ISA was subject to a 20% charge on the interest earned.
Generous tax break
The ISA allowance has now been increased from £11,880 to £15,000 for the 2014/15 tax year. For any couple, that means they can put aside £30,000 for this tax year, which is a generous tax break. This means you can now save another £3,120 into either cash or stocks and shares in the current tax year. The amount that can be paid into a Junior ISA for the 2014/15 tax year has also increased from £3,840 to £4,000. Do bear in mind that whilst the NISA does allow a generous amount to be sheltered from tax during your life, the total amount forms part of your estate on death and so could be subject to 40% tax.
Moving your existing investments
You also now have the full flexibility of moving your existing investments in a Stocks & Shares ISA to a Cash ISA, or vice versa. You should not withdraw sums from your Stocks & Shares account yourself in order to deposit it into a Cash NISA, or the other way around. If you do, any amount that you pay in may count as a fresh payment against your overall limit of £15,000.
NISA subscription limit
It is worth noting that if you have paid into a Cash or Stocks & Shares ISA since 6 April 2014, you will not be able to open a further NISA of the same type before 6 April 2015. You may however make additional payments – up to the £15,000 NISA subscription limit – into your existing account(s).
As of 1 July 2014, there is now increased flexibility in the way that you can use your ISA allowance.
You can now allocate:
- the full £15,000 in a Stocks & Shares ISA
- the full £15,000 in a Cash ISA
- any combination of amounts between a Stocks & Shares ISA and a Cash ISA up to the new limit
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.