Are you taking advantage of Individual Savings Accounts (ISA)

Continuing low interest rates may have reduced the attractiveness of Individual Savings Accounts (ISA), but these tax-free savings vehicles remain popular. They have undergone significant changes in recent years, and the rules for investing are now much simpler.

Adult savers can invest in any combination of cash or stocks and shares up to the overall annual subscription limit, which is set at £20,000 in 2017/18. However, an individual may only pay into a maximum of one Cash ISA and one Stocks and Shares ISA each year. You have until 5 April 2017 to make your 2016/17 ISA investment, which is a maximum of £15,240.

In addition, a tax-free Junior ISA (JISA) is available to all UK-resident children under the age of 18 as a Cash or Stocks and Shares product or both. Total annual contributions are capped at £4,128 in 2017/18 (£4,080 for 2016/17). Funds placed in a JISA will be owned by the child but withdrawals are not permitted until the child reaches adulthood.

Meanwhile, the Help to Buy ISA offers unique incentives for those saving for their first home. This has been available since 1 December 2015 and enables first-time buyers to save monthly deposits of up to £200, with an opportunity to deposit an additional £1,000 when the account is first opened. The Government will then provide a 25% tax free bonus on the total amount saved, including interest, capped at a maximum of £3,000 on savings of £12,000. The bonus can only be put towards a first home located in the UK with a purchase value of £250,000 or less, or up to £450,000 in London.

The new Lifetime ISA (LISA) will be available from April 2017. Individuals between the ages of 18 and 40 can save up to £4,000 each year and receive a 25% increase from the government. The money can either be used to purchase a first home or to be kept until the individual is 60. The government increase will be removed and there may be charges if the funds are withdrawn prior to the individual reaching 60 years old, unless the money is used to buy a first home.

If you already have a Help to Buy ISA you can transfer those savings into a LISA in 2017, or continue saving into both – but you will only be able to use the bonus from one to buy a house.

An individual may only subscribe to one Cash ISA per year, so an account holder cannot subscribe to a Help to Buy ISA and a Cash ISA.

If you would like to discuss this in more detail, please Contact Us