Have you taken advantage of your larger tax-efficient allowance?
The new Individual Savings Account (ISA) rules were introduced in July, giving savers and investors more flexibility and a larger tax-efficient allowance than ever before. Four out of ten people told the consumer organisation Which? that they would save more as a result of the annual limit increasing to £15,000, up from £11,880.
Over the previous 15 years, more than 23 million people have opened ISAs, totalling over £440 billion, according to HM Revenue & Customs.
The increase in the total amount you can save and invest in what are now called New Individual Savings Accounts (NISAs) is not the only change since July.
New flexibility and higher limits
You pay no tax on the interest you earn in a Cash NISA
With a Stocks & Shares NISA, you pay no capital gains tax on any profits and no tax on interest earned on bonds. The dividends paid on shares or funds do have the basic rate of 10% tax deducted. This means that higher and additional rate taxpayers don’t have to pay their higher rate of tax on their dividend payments.
It’s never too late to start saving
If you’ve already paid into an ISA in this current tax year, you can top it up to the new limit if your provider allows – each account provider will have different deadlines by which date all requests to increase amounts must be processed.
If you want to add more money and your provider doesn’t allow it, if appropriate you could transfer your existing Cash ISA to another provider that will allow top-ups. You’ll need to check first whether there are any penalties for transferring to another provider.
Another alternative if you’ve opened a Cash ISA and not fully utilised your allowance at the start of this tax year is to open a Stocks & Shares NISA to use the rest of your allowance. Remember, you are only allowed to open one Cash NISA and one Stocks & Shares NISA in one tax year.
Did you know?
You can decide how you want to split the £15,000 between the Cash and Stocks & Shares parts of a NISA
Or you can allocate the whole £15,000 into either a Cash or Stocks & Shares NISA. Previously you could only put up to half the annual ISA allowance into a Cash ISA
You can move your money from a Stocks & Shares NISA into a Cash NISA, or vice versa. Previously you couldn’t move money from a Stocks & Shares ISA into a Cash ISA
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.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.