ISAs
NB - Legislation relating to Individual Savings Accounts is subject to change.
Individual Savings Accounts (ISAs) are available to all UK residents over 18 years of age, 16 years of age for the Cash ISAs. They benefit all taxpayers, as any income or capital gains received from investments held within an ISA do not have to be declared to the tax man.
ISAs can invest in cash or longer term investments like stocks and shares (including unit trusts, investment trusts, Open Ended Investment Companies, some fixed interest securities, or any share quoted on a stock exchange recognised by the Inland Revenue.)
Legislation changed the ISA rules and came into force in the 2008/2009 tax year. The distinction between a Mini and Maxi ISA's has dissapeared and have been replaced with a choice between a Cash ISA and Stocks and Shares ISA.
The overall ISA limit has increased to £10,680 (2011/12) of which £5,340 can be placed within a Cash ISA. The Stocks and Shares ISA has a limit of £10,680. You can take out a Stocks & Shares ISA and a Cash ISA in the same tax year subject to the overall limit applicable to that tax year. For example if you placed £5,340 in a Cash ISA, you could then invest up to £5,340 in the Stocks & Shares ISA in the tax year ended 5th April 2012.
Cash Mini ISA's and TESSA only ISA's, (TOISA's) automatically become Cash ISA's. Personal Equity Plans, (PEP's) automatically become Stocks & Shares ISA's.
Investment Limits
Cash ISA's - Cash ISA's are wildly available with different interest rates. It is a good idea to shop around for the best Cash ISA rates. It is important however to understand the conditions attached to those rates, for instance access may be restricted in order to achieve that particular rate. The limit for a cash ISA is £5,340.
Stocks & Shares ISA- You can invest £10,680 per tax year in a Stocks & Shares ISA and there is no upper limit on the stocks and share holdings. Therefore your entire holdings can be in stocks and shares. However if you hold a Cash ISA which you have taken out in the same tax year, you will be restricted to the difference between the overall ISA limit of £10,680 and what you have deposited in the Cash ISA. The Stocks & Shares ISA is one account and managed by one provider.
You can invest in one Stocks & Shares ISA and one Cash ISA in the same tax year, subject to the overall limit of £10,680 for the 2011/12 tax year.
See Also:
Junior ISAs
Self Select ISAs