ISA Advice & Contribution Allowances for 2014/15
As of 1st July 2014 all UK residents aged 18 or over can invest up to a maximum £15,000 in to an ISA (NISA or New ISA).
The Cash ISA & Stocks and Shares ISA allowance is now £15,000 for the 2014/15 tax year.
This is because the Cash and Stocks & Shares ISA versions have been merged so there is only one type of ISA now, the NISA.
As before you can invest as much as you like in either Cash or Stocks and Shares, as long as the overall limit of £15,000 is not exceeded.
The new Junior ISA became available on 1st November 2011 and is available to all children under the age of 18 that were ineligible for a Child Trust Fund.
The contribution limit is £4,000 as of 1st July 2014.
Those children that hold a Child Trust Fund (CTF) must continue to do so. There is no way of merging the Junior ISA and CTF just yet but there are plans to allow this from April 2015.
The investment limit for CTFs is also £4,000, in line with the Junior ISA.
However an important point to note is that once the money has been invested into a Junior ISA then it becomes the property of the child. No one is allowed to access the money until the child themselves is permitted to at age 18, unless under certain circumstances.
When the child reaches age 18 their ISA will convert to a normal (adult) ISA and they will be free to utilise the money as they wish. You may want to read our blog on investing money for your child, which talks about the pressures of having access to a lot of money at a young age.
Until then the money invested will grow in a tax efficient environment free from capital gain tax and income tax.
Why should you invest in an ISA now?
Well nobody likes paying tax. The problem is that this economic crisis has meant the Government is looking into all the different ways it can generate more income. The best way for it to do that is to raise taxes or reduce allowances, and these include income tax and capital gains tax. Investing in an ISA now will protect your money from both income and capital gains tax, which could increase whether it’s a Labour, Conservative or coalition government.
Investing into an ISA allows your money to grow free from the concerns of capital gains tax, then when you are older you could draw an income from your investments that is free of income tax.
Remember once this tax year ends you will have lost this year’s allowance for good and can only make use of the allowance available in future years.
More about ISAs…
An ISA is a wrapper that you can use to protect your investments from the tax man. Any gains you make on investments within the ISA are free of capital gains tax and any savings are free of income tax.
As a nation it feels like we get taxed on just about everything we do. So if there is any way to avoid paying tax on your savings and investments you should probably make the most of it.
Each financial year (6th April to 5th April the next year) you are given an allowance of £11,880 (in 2014/15). You can choose whether to use this or not. Once the year ends however, you can’t use the previous year’s allowance so it’s important to make the most of it while you can.
For a Cash ISA there are a range of providers (usually banks and building societies) that can offer good terms and rates of interest.
For a Stocks and Shares ISA you can invest in funds that suit your needs and although generally considered a more long term investment you can access the money any time you need to. Although there are various methods of investing, an online ISA can give you the control and flexibility you need to make the right choices at the right time.