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ISA rules may have changed, but the premise stays the same
31st May 2016
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Individual Savings Accounts, ISA’s, are the tax free products offered by many Financial Institutions; banks, building society’s and so on. There are two types of ISA; cash ISA’s and Stocks and Shares ISA’s. Savers can put money into one of each type in one tax year.

 

The maximum limit for 2016-2017 is £15240 in total

In his summer budget in 2015 Mr Osborne, the Chancellor of the Exchequer, confirmed the changes that have now come into effect covering withdrawals, dividend tax credit for stocks and shares, Help to Buy ISA’s, and peer-to-peer lending. 


Martin Lewis of Money Saving Expert.com says

‘Many people think ISAs are complicated. That perception grew last year when ISAs got the biggest overhaul they've had since they were launched. But, even though the rules have changed, the premise stays the same. ISAs are simply tax-free accounts for your savings or investments.’



Money Saving Expert.com also goes on to say,
‘The old ISA system used to limit how much you could put into each pot - you'd either get half your allowance in cash and half in shares, or you could choose to put it all in shares.

But since July 2015, the rules were almost completely relaxed. Although you still have a limit to the amount you can save - £15,240 from 6 April 2016 - you now get to choose how you split this between stocks & shares, cash ISAs and as of April 2016, the new innovative finance ISAs you even get to choose whether you want to split it - if not, you can use the whole amount for stocks & shares, the whole amount for cash or the whole amount in an innovative finance ISA.

There are tax benefits attached to ISA’s. By placing money in an ISA account there are advantages, you will pay zero tax on profits. Investors do not have to pay any capital gains tax on profits made from share price increases. There is no tax liability on interest earned bonds, and No tax on dividend income, inside an ISA and you don't have to pay tax on dividends.’

 

Martin also has this to say about withdrawing money from an ISA

‘A common mistake is to think an ISA needs to be held for a set length of time in order to reap the tax-free benefits.
Luckily, that's wrong. Providing the rules of the individual product allow it (there are loads that do), you can have full, instant access to your money without losing the tax benefits on the rest of your savings within the ISA.

But once the money's withdrawn, it can't be returned.'

 

If you would like to read more about ISA's, take a look at Martin's Money Savings Expert website at:

http://www.moneysavingexpert.com/savings/ISA-guide-savings-without-tax 

OR

Try looking at the government website at:

https://www.gov.uk/individual-savings-accounts/withdrawing-your-money

 


 

If you would like to speak with a financial advisor or accountant, we can recommend UHY Hacker Young Chartered Accountants.

 

 

 

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