It is very rare that the Government provides something that shelters your money from tax – but an Individual Savings Account (ISA) is one of those investments. Introduced in 1999, it has now become the primary savings vehicle in the UK with more than 17 million people – about one in every three adults – now owning one.
From 1 July 2014 cash ISA’s and Stocks and Shares ISA’s were merged into a single NISA, which will have a limit of £15,000.
The Autumn Statement 2014 bought another pleasant surprise for ISA savers and investors:
ISA wrapper continues on death
Previously, if you die and leave your ISA to your spouse, the tax benefits of the ISA are lost meaning that future growth and income could be taxed. To put it another way, when you die so would the tax-efficiency of your ISA.
However, in a surprise move, the Chancellor announced that ISA’s left to your spouse when you die will now keep their tax-efficient ISA status, allowing tax-efficient growth and income. The new rules started on 3rd December 2014.
Some press reports have hailed this change as a scrapping of the ‘ISA death tax’, which isn’t the case. Inheritance Tax is never paid when assets are transferred between spouses and despite today’s announcement, Inheritance Tax could still be payable on the ISA when the second spouse dies.
Maximum contributions The Chancellor also announced that the maximum annual ISA contribution will rise on 6th April 2015 from £15,000 to £15,240. Click here to read more.
As you can see, even the very best rates are not particularly exciting but remember, you only get one ISA allowance a year and if you don’t use it, you will lose it.
As long as you fund your ISA by the end of the tax year it remains tax-free, forever (unless a future Government changes the rules). What this means is that you can build up a sizeable tax-free savings pot, and the whole lot remains tax-free, not just that specific year’s allowance.
You pay no Capital Gains Tax and no further tax on the income. You can invest for income or growth and withdraw your tax-free savings whenever you need. The new rules simply mean that you can now shelter more of your assets from tax than ever before.
It isn’t often that the Government helps put money in your pocket, so we would suggest that you act now to take full advantage of this tax break.
To find out more, please telephone 020 3728 7900 or send us an email.