ISAs
NB - Legislation relating to Individual Savings Accounts is subject to change.
Individual Savings Accounts (ISAs) are available to all UK residents over 18 yrs of age. They benefit all taxpayers, especially those paying the higher rate. Unfortunately, they are not quite as easy to understand as they should be. Here goes:
They're the latest Government scheme to stop the taxman getting his hands on your savings, replacing PEPs and TESSAs, but if you have one of these don’t worry, you can keep your existing PEPs indefinitely and TESSAs until maturity.
You can invest via a number of components within an ISA; cash, stocks and shares to include unit/investment trusts, Open Ended Investment Companies (OEICs), Gilts (bought with at least 5 years until maturity), or any share quoted on a stock exchange recognised by the Inland Revenue.
If you have a maturing TESSA you can invest the original capital (without accrued interest) into a special TESSA only ISA. This will not effect your ISA allowance in the given year.
This is where it gets complicated!
Basically, you can invest a maximum of £7,000 into ISAs. You can choose to do this by having up to two mini ISAs- Mini Cash and Mini Share or by putting the entire £7000 into one Maxi ISA. You cannot run a Mini and a Maxi ISA together and you cannot have two Mini ISAs of the same type, i.e. two Mini Cash ISAs.
The Mini ISA
If you choose this option you can have a maximum of £3000 in a Mini Cash ISA and £4000 in a Mini Share ISA . The division of holdings is inflexible. However, you can have each Mini ISA with different providers and are therefore free to shop around for the best Cash ISA rates.
The Maxi ISA
The main differentiator is the flexibility in the division of holdings. There is no upper limit on share holdings (up to £7000) and therefore your entire holdings can be in stocks and shares. However the upper limit is still £3000 in cash. The Maxi ISA is one account and managed by one provider therefore you would have to have the cash ISA rates offered by this provider. Maxi ISAs are generally the best option for those who want the major part of their holdings to be in stocks and shares.
See Also:
Self Select ISAs
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