Make the most of your ISA

March 19th 2008

With the tax year rapidly drawing to a close, how many of you have thought about topping up your ISA account and reaping the financial benefits?

It’s estimated that during this current tax year, savers in the UK could be paying more than £230million extra in tax by failing to take advantage of their annual ISA allowance (source: Nationwide).

At present, savers can invest:

• £3,000 each tax year in a mini cash ISA
• £4,000 each tax year in a stocks and shares mini ISA
• Or £7,000 each tax year in a maxi ISA, of which up to £3,000 may be in cash

This will change from 6 April 2008, when new ISA rules come into force, wiping out the mini/maxi distinction and allowing savers to invest up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA. This increases the overall savings limit to £7,200, but means some savers will have a lower investment ceiling for their stocks and shares than they do now.

The changes, announced by the government in the pre-budget report of 2006, also mean that any cash saved so far in ISAs could be transferred to a new stocks and shares ISA, without affecting that year’s contribution limit. However it will not be possible to transfer back to a cash ISA.

Old Personal Equity Plans will be renamed ISAs and it will now be possible to transfer your old PEPs to ISA accounts to hold all your tax free investments under one wrapper.

With the ISA season drawing to a close, you should be ensuring you take full advantage of the tax-efficient savings on offer by using all of your ISA allowance for this tax year. If you don’t, your unused allowance will be lost forever.

If you’d like professional advice on your stocks and shares ISA allowance and how to maximise your investments, contact a member of the Prosperis team.

For more information on cash ISAs visit www.moneysupermarket.com.