With less than a month to go before the end of the tax year, it’s time to start looking at your savings portfolio if you haven’t already done so.
One of the most tax efficient savings is the ISA.
· Cash ISA limit for 2010/11 is £5,100 if only invested in Cash ISA (must be over 16 years old)
· Stocks and Shares ISA limit for 2010/11 is £10,200, out of which £5,100 can be put in a cash ISA (must be over 18 years old)
With a stocks and shares ISA, basic rate tax payers who invest in products producing dividend income will see no benefit, whereas higher rate tax payers will. The benefit arises when investing in fixed-interest products like bonds and gilts as the interest is tax free just like in a cash ISA. Finally there is no Capital Gains Tax (CGT) due on this type of ISA.
When considering a cash ISA think about whether you want a fixed or variable rate. Some products have bonuses too for the first year, so it is always advisable to review your savings each year to make sure you are getting the best rate.
Note that you can only open 1 cash and 1 stocks and shares ISA in a tax year.
Also, you can only use your ISA allowance once, so if you put £3,600 into a cash ISA, withdraw £1,000, you can’t then replace it with another £1,000.
Finally, if you are not happy with your current Cash ISA rate you can transfer all or part of your prior tax years’ ISA to a new provider.
For an idea of best ISA rates, look at the Moneysupermarket.com website.
Note that this is an introductory guide to ISA’s and should not be used solely as a guide to your investment decision. There can be no substitute for detailed analysis of your individual circumstances, and Moore Accountancy are happy to help you, should you require it.
Do call us if you would like further help or advice on this subject.
Article written for Best of Warrington readers by Sid Moore of Moore Accountancy
Member since: 21st March 2011
Chartered Accountant and Sole Practioner at Moore Accountancy, based in Altrincham.
Wife of one and mother of three.
Loves running, badminton, reading, going out with the girls and surfing the web! :)