ISAs
Recent changes in the 2009 Budget
The chancellor has recently increased the amount that can be paid into an Individual Savings Account (ISA) each year from £7,200 to £10,200. This is good news for savers particularly during these times of paltry interest rates. Unfortunately the Treasury never makes this simple however and has decided to implement this increase in stages, which will work as follows:
From 6 October, those aged over 50 will enjoy the new ISA limit, but those under this age will have to wait till the following tax year before they can start to benefit.
The basic structure of ISA’s is being kept the same, namely
Option 1
Option 2
An ISA is an advantages tax wrapper, with regard to stocks and shares ISA’s in simple terms all the capital growth and any income distributions within the plan are free of tax. Unfortunately, the additional tax advantage of the repayment of the tax paid on dividends, that the fund managers of ISA based funds were previously eligible to, is no longer available due to the removal of this tax break by the chancellor. With regard to cash ISA’s, simply all of the interest is tax free.
It is a common misconception to mistake the tax efficiencies of an ISA wrapper with the performance of the underlying funds inside that wrapper. ISA’s are simply a vehicle for the underlying investment. It is of paramount importance to make sure that the underlying funds within the wrapper are of high quality. Major considerations are:
So please give us a call for an unbiased evaluation of your PEP and ISA portfolio.
The chancellor has recently increased the amount that can be paid into an Individual Savings Account (ISA) each year from £7,200 to £10,200. This is good news for savers particularly during these times of paltry interest rates. Unfortunately the Treasury never makes this simple however and has decided to implement this increase in stages, which will work as follows:
From 6 October, those aged over 50 will enjoy the new ISA limit, but those under this age will have to wait till the following tax year before they can start to benefit.
The basic structure of ISA’s is being kept the same, namely
Option 1
- half the allowance is kept in cash
- half the allowance is invested into a stocks and shares vehicle
Option 2
- the whole £10,200 is invested into stocks and shares
An ISA is an advantages tax wrapper, with regard to stocks and shares ISA’s in simple terms all the capital growth and any income distributions within the plan are free of tax. Unfortunately, the additional tax advantage of the repayment of the tax paid on dividends, that the fund managers of ISA based funds were previously eligible to, is no longer available due to the removal of this tax break by the chancellor. With regard to cash ISA’s, simply all of the interest is tax free.
It is a common misconception to mistake the tax efficiencies of an ISA wrapper with the performance of the underlying funds inside that wrapper. ISA’s are simply a vehicle for the underlying investment. It is of paramount importance to make sure that the underlying funds within the wrapper are of high quality. Major considerations are:
- Charges
- Quality and continuity of past performance
- Experience and track record of the fund managers responsible for the investment fund
- Identify funds with solid and consistent performance
- Balance your PEP and ISA portfolio in such a way that the downside is minimised in the poor markets, while the upside is not too inhibited in the fair weather markets
- Monitor and maintain the performance and charges of the funds you are already invested in.
So please give us a call for an unbiased evaluation of your PEP and ISA portfolio.
- Balance the asset allocation of your portfolio
- Ensure the diversification and risk levels of the investments within the fund are appropriate