The NISA Way To Save
Saving into an ISA is a great way of making the most of your cash. Whether you’re looking to supplement your retirement income, build up funds for a property purchase or you simply want a ‘rainy day’ nest egg, ISAs offer an array of savings options.
ISAs underwent a transformation in 2014. A series of reforms swept away old restrictions which had meant that you could only save up to half of your annual allowance in cash, with the remainder needing to be invested in stocks and shares.
Now, you can save all your annual allowance in cash, or in any combination of cash and stocks and shares.
Your annual allowance
The annual ISA allowance has become significantly more generous. The allowance for the 2014/15 tax year was £15,000 and the 2015/16 allowance is £15,240. And you can take your money out at any time too.
The tax breaks
Tax breaks for ISA investors remain as attractive as ever:
- Any income from ISA savings and investments, whether interest, dividends or bonuses, is completely free of Income Tax
- There is no Capital Gains Tax to pay on gains arising from ISA investments
- You do not have to detail your ISA savings on your tax return, or even tell the taxman that you are an ISA investor
New ISA perks
In the December 2014 Autumn Statement, Chancellor George Osborne announced that spouses would be able to inherit their partner’s ISA allowance.
The change means that if an ISA holder dies, they can pass on their existing ISA benefits to their spouse or civil partner via an additional ISA allowance.
The surviving spouse or civil partner will get a one-off boost to their total ISA limit equal to the value of the ISA savings they inherit. This is in addition to their normal annual ISA limit.
Around 150,000 people a year have previously been losing out on the tax advantages of their partner’s ISA after their death, even if they were saving as a couple.
Decisions decisions
As an ISA investor, the array of potential options is vast. Firstly, you may be weighing up how much money to save in cash and how much to save in stocks and shares.
A cash ISA could give you more certainty over your returns, but investing in stocks and shares could potentially offer higher returns.
Generally speaking, if you want to tie up your money for a while, and you are comfortable with the value of your investments possibly going up and down, it could be worth thinking about a stocks and shares ISA.
The current tax situation may not be maintained. The benefit of the tax treatment depends on the individual circumstances.
The value of your stocks and shares ISA and any income from it may fall as well as rise. You may not get back the amount you originally invested.
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