ISAs

Take Control of Your ISA

 

With interest rates stubbornly low the DIY investor should be sure to take full advantage of the tax-free allowance they have across an expanding family of ISAs

For the tax year 2016-17 you can shelter up to £15,240 into New ISA (NISA) wrappers in any combination of cash or stocks and shares and you won’t pay tax on the interest you earn.

You can also invest up to £4080 for children in Junior ISAs (JISA), Help to Buy ISAs haver recently been launched to help first time buyers and an Innovative Finance ISA will allow peer to peer loans to be held from April 2016.

ISA allowances cannot be rolled over from one tax year to another so you have until midnight on April 5th to use it or lose it.

Take Control of Your ISA

 

ISA, ISA, Maybe?Introducing ISAsCash ISAsStocks and Shares ISAISA Changes in 2016Help to Buy ISAInnovative Finance ISALifetime ISASelf-Select ISAISAs - Join 'the Club'ISA inheritanceJunior ISAs in Action

ISAs and the DIY Investor

 

ISAs are a powerful weapon in the DIY investor’s armoury with recent changes to ISA rules bringing greater choice and flexibility.

Savers starved of interest may find the tax free returns of Cash ISAs an improvement, with instant access if required or the ability to transfer to an investment product in search of higher returns.

Managed Stocks and Shares ISAs allow the investor to select a provider and investment fund that matches their objectives and risk tolerance.

Junior ISAs allow you to give a loved one a financial head start, and the Help to Buy ISA is there for first time buyers; greater choice comes with the inclusion of peer to peer lending and crowd funding in the Innovative Finance ISA.

As well as managed products DIY Investor delivers information and education to ensure that those taking advantage of the total freedom offered by a Self-Select ISA are able to make informed investment decisions and we invite you to share your experience with the community.

Introducing ISAs

 

Individual Savings Accounts – ISAs – allow UK taxpayers to save or invest up to £15,240 (tax year 2016-7) without paying tax on any interest they receive.

There are two key variants of managed product;

 

        Cash ISA

Stocks and Shares ISA

 

Much of the content in the ISA section will focus on the Self Select ISA which is a tax-wrapped account that allows the DIY investor to make the investment decisions.

ISAs have been around for fifteen years now and with increasing subscription rates it has been estimated that by fully subscribing each year and achieving an investment return of 5% p.a. after fees, it is possible to build up a £1 million ISA pot within 29 years.
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Cash ISAs

 

Unless you are tax exempt, you pay tax on any interest on savings you earn; you may not even realise it because 20% of your interest is deducted before you receive it.

Higher and top-rate taxpayers have to declare their earnings to the taxman and then pay the extra tax.

Cash ISAs are savings accounts that allow you to save without paying tax on any interest that you earn.

Each year you have an ISA allowance, which is an amount you can save into a tax-free account and this resets at the beginning of each tax year – it cannot roll over, if you don’t use it in a particular tax year it is gone forever.

The allowance for the 2016-17 tax year is £15,240, all of which can be in cash.
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Stocks and Shares ISAs

 

A Stocks and Shares or Investment ISA is a tax free wrapper that holds stock market and other types of investments; there is the risk that the value of your investments could go down as well as up.

Each tax year you have an ISA allowance, which is the amount you can put into tax-free savings and investments and that amount resets every new tax year; if you haven’t used it by midnight on 5th April, you lose it.

Whilst past performance does not guarantee future returns, Moneyfacts reported that 90.7% of ISA funds grew in the 2014-5 tax year with an average gain of 7.3% compared with a 1.53% return from Cash ISAs.

Stocks and Shares ISAs are available from a whole range of investment platforms where you will find a lot of historical and product data to inform your decision and also the potential to take full control of investment decisions with a Self-Select ISA.
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ISA Changes in 2016

 

Following on from the greater flexibility that came with the introduction of the New ISA or ‘NISA’ in July 2014 several more rule changes come into force this year, helping you get even more out of your savings and investments.
Help to Buy ISA
Innovative Finance ISA
Estate Management
Flexible ISA
Unrestricted Transfers between ISAs

 

flexibility

 

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Help to Buy ISA

 

The Help to Buy ISA launched on 1st December 2015 in order to help first-time buyers get onto the property ladder.

It is a type of Cash ISA that allows first-time buyers to save up to £200 a month which the government then tops up by 25%.

An initial deposit of up to £1,000 can be made and if subscribing the maximum allowance, the government will top the account up by the equivalent of an additional £50 per month.

The government bonus is capped at £3,000 so the maximum amount you can save into a Help to Buy ISA is £12,000, but accounts are limited to one per person rather than one per home so people buying together can each receive the government bonus as long as they have not purchased or had an interest in a property in the UK before.
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Innovative Finance ISA

 

The Innovative Finance ISA will allow savers using peer-to-peer lending platforms to receive tax-free interest from April 2016.

Peer-to-peer (P2P) lending platforms that allow savers to lend directly to borrowers – individuals or companies – have grown exponentially and by the end of 2015 the amount lent was estimated to have passed £4 billion.

By cutting out traditional lenders such as banks and building societies, borrows are able to achieve extremely competitive loans whilst lenders are able to beat the savings rates on offer on the high street.

 

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Lifetime ISA

 

From April 6th 2017 anyone between the ages of 18 and 40 will be able to save into a new, more flexible, ISA wrapper and use the proceeds to either get a foot on the housing ladder, or provide for their retirement.

The Lifetime ISA, announced in the 2016 budget, rewards savers by contributing £1 for every £4 they put away, and is seen by many as a step closer to a Pension ISA which would harmonise the tax treatment of personal pensions and ISA wrappers.

Those contributing to a Lifetime ISA (inevitably a ‘LISA’) can save up to £4,000 per year towards a first home or their retirement and receive a 25% bonus from the government.

 

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Self-Select ISA

 

A Self-Select ISA is a type of stocks and shares ISA (as opposed to a Cash ISA) which gives the DIY investor total control of the investments that are held within it, subject to prevailing ISA rules.

Self-Select ISA is a tax wrapper that allows you to invest in the stock market but with no fund manager making investment decisions, you have freedom to choose what assets you hold and when you trade them, putting you in complete control.

These accounts are usually offered by execution-only (XO) stockbrokers or wealth management companies and (may) generate returns that are almost entirely free from income and capital gains tax.

 

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ISAs – Join ‘the Club’

 

The ISA has a vital role to play in any long-term investment strategy and once the calendar shows 6th April, that 2015-16 allowance will be gone forever.

Once the preserve of an elite group of stock pickers, the ‘ISA Millionaires’ Club’ has been expanding of late – due in part to above-inflation increases in subscription levels; investors can shelter £15,240 in the current tax year with total flexibility around the combination of cash and stocks and shares.

But it is not only subscription levels that account; having existed for more than 15 years, ISA asset growth points to the benefits of long-term investing.

Brewin Dolphin calculates that an investor making the maximum subscription each year and achieving a 5% return after fees could achieve a pot of £1 million within 29 years.

 

diamond

 

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ISA Inheritance

 

Changes to ISA inheritance rules implemented in April 2015 brought an end to what had been seen as an unfair and punitive ‘death tax’, with up to 150,000 people a year set to benefit by inheriting their partner’s ISA tax benefits.

Before then upon the death of an ISA account holder died, the account was closed and the tax-free status of the investment terminated; the new regulations reverse this as long as certain conditions are satisfied.

 

 

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Juinor ISAs in Action

 

According to the Institute for Fiscal Studies, those born in the 60s and 70s are the first generation since the Second World War to be poorer than their parents.

Those leaving further education in 2016 face the prospect of student debt in excess of £50,000, fierce competition for employment , wage stagnation and ‘gazumping’ has returned to London’s super-heated housing market.

According to the Office for National Statistics there were over 800,000 births in the UK last year, an increase in the birth rate of 18% in a decade and it seems that the ‘Bank of Mum and Dad’ is going to have to work harder than ever in order to be able to help out in the future.

 

 

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UK’s first ISA millionaire talks about Company Refs

Introducing the Lifetime ISA

Introducing the Innovative Finance ISA

Stocks and Shares ISAs Explained

Introducing ISAs in Three Minutes

Help to Buy ISA in Three Minutes

The Essential Guide to New ISAs

Open a Stocks and Shares ISA

New ISAs Explained

ISAs Explained

15th


Dec

Government Swats Away Call for Advice and Backs the Lifetime ISA

Fears that LISAs will cannibalise auto-enrolment dismissed

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1st


Dec

The Quest for Income: Market Place Lending Comes of Age

The launch of the Innovative Finance ISA has taken P2P lending into the mainstream

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23rd


Nov

‘KISS’ – Humbug Joins Telegraph’s Campaign to Keep ISAs Simple

With the best intentions, have ISAs become just too complex?

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16th


Nov

Getting More out of Your ISAs

Crowdstacker Explains the Innovative Finance ISA

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26th


Aug

Savers hit as Nat West Scoops Prize for Most Mingy Cash ISA

A perfect storm of falling rates and rising inflation means that savers are in for a torrid time

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21st


Aug

The Not Much Help to Buyers ISA

500,000 first-time buyers told they cannot use savings as deposit on homes

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4th


Apr

Regulation Stymies Innovative Finance ISA Providers

With a planned launch date of 6th April many would-be IFISA providers await permission

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28th


Mar

Five Tips for Investing in Investment Trusts through an ISA

Henderson Global Investors' 5 top tips for Investing in Investment Trusts in an ISA

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28th


Mar

Introducing the Lifetime ISA

New, more flexible, wrapper for first time buyers and retirement planning

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26th


Mar

A Pension, an ISA or a LISA?

With the launch of the Lifetime ISA, young savers now have another option for retirement planning

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24th


Mar

Why Index Investing is Good for Your ISA.

Investing is like any other long term activity – it needs a clear destination or purpose

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4th


Mar

Innovative Finance ISA

DIY Investor's introduction to the tax efficient wrapper for peer-to-peer lending

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4th


Mar

Greater Flexibility for ISA in 2016

DIY Investor looks at the changes that are coming for ISA savers and investors

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4th


Mar

ISA Inheritance

New rules introduced saw the end of the much reviled ISA 'death tax'

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4th


Mar

ISA Investing –Join ‘the Club’

With ‘ISA season’ on the horizon, Stephen Haysom explains the basics and benefits

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4th


Mar

Self-Select ISA

DIY Investor's introduction to the tax efficient wrapper that delivers the ultimate in freedom and

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4th


Mar

Help to Buy ISA

DIY Investor's introduction to the new Help to Buy ISA

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4th


Mar

Cash ISAs

DIY Investor's introduction to Cash ISAs

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3rd


Mar

Introducing ISAs

DIY Investor's introduction to Individual Savings Accounts

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2nd


Mar

Building a Balanced Portfolio

DIY Investor looks at the key things to consider when constructing your investment portfolio.

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1st


Mar

Junior ISA Offers Tax Efficiency to the Bank of Mum and Dad

How can you give your child a financial headstart?

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1st


Mar

Make your Portfolio Tax Efficient

Make sure your portfolio is as efficient as possible by making best use of all available allowances.

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1st


Mar

Six of the best: potential pitfalls that can whack the unwary DIY investor

Why the British Army's 'Rule of the Seven Ps' could help you be a better investor.

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26th


Feb

In ISAs we Trust

The case for investment trusts in your ISA portfolio

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25th


Feb

Measure Twice, Cut Once – SELECTING AN INVESTMENT COMPANY FOR YOUR NISA

The importance of planning and research in selecting the right investment companies

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17th


Feb

High Five: Index Investing for the DIY Investor

Why low cost, passive investing could be the ideal solution for the time poor DIY Investor.

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11th


Jan

Stocks and Shares ISAs

DIY Investor's introduction to Stocks and Shares or Investment ISAs

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17th


Dec

First ISA Eligible Retail Bond Based on Peer-to-Peer Lending

peer-to-peer lender Wellesley unveiled the first ever ISA compliant retail bond that invests in

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14th


Dec

An ISA or a Pension, that is the Question…

Daniel Hawkins weighs up the relative merits of ISA and Pension saving

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6th


Oct

Investing – Start With the end in Mind

DAN Norman gives his thoughts on the best long term strategy for your ISA.

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1st


Oct

AIM Comes of Age with ISA Admission – How Was it For You?

Caveat emptor in the search for jewels in the world of diggers and drillers

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11th


Jan

So Much ‘NISA’ – an Introduction to the New ISA

DIY Investor Magazine looks at the introduction of the New ISA in 2014

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12th


Jan

Protect Your Investment Portfolio

DIY Investor Considers the Relative Merits of SIPPs and ISAs When Saving for Retirement

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