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New ISA Limits for Savers & Junior ISA

Making sure that your investments are as tax-efficient as possible is one of the simplest ways of maximising your returns. With no tax to pay on gains made within an Individual Savings Account (ISA), this can be a very efficient way of investing. Don't forget that the new higher ISA limit applies from 6th April 2012.

From 6th April 2012, you will be able to invest up to £11,280 a year into an ISA, that's up to £5,640 a year for a cash ISA and up to £11,280 into a stocks and shares ISA- or a combination of the two. All interest/growth is paid tax-free.

Many cash ISA accounts are not paying that much interest but investors/savers could consider transferring money saved in a cash ISA into a stocks and shares ISA - as long as you transfer the full amount. There would be more investment risk but it might be worth it.

Saving for children

The Government introduced some new rules that allow you to give a child, or invest on their behalf, as much money as you like. But, if you are a parent, or step parent and the money you give your child earns more that £100 interest per year, this interest will be taxed as if it were your own.

Each parent (and step-parent) has a separate £100 limit, so, if both parents contribute equally, the child could receive interest of £200 a year without either parent having to pay tax on it. This is known as the parental settlement rule.

What can grandparents give?

Grandparents have the advantage over parents when it comes to income tax on investments for children. If an investment made by a parent generates income of above £100 a year, the income is taxed as the parents. Income on investments made by grandparents, other relatives or friends is taxed as the child's - which usually means it is tax-free, as most children do not use their annual income tax allowance (£7,475 in 2011/12). Be sure to fill in Form R85 so that you don't have to claim the tax back later. Child Trust Funds, like ISAs, are free of income tax or capital gains tax liability.

For whomever, or whatever you are choosing to save, ISAs can offer the investor a wide range of funds to suit individual investment needs and the flexibility to switch between funds as your circumstances change, at no extra cost. In particular, holding your ISA on a platform such as Elevate allows you to additional choice of the use of model portfolios.

Don't forget that ISAs can go up or down in value depending on market conditions and may not return the initial sum invested. For further information and advice please e mail advice@prosperis.co.uk

What is a Junior ISA?

Junior ISAs are long-term tax-free savings accounts for children. Your child can have a Junior ISA if they are under 18, live in the UK and do not already have a Child Trust Fund account. Each child can have one cash and one 'stocks and shares' Junior ISA at any one time. Anybody can put money into a Junior ISA for the benefit of the child.

The total limit for payments into Junior ISAs is £3,600 in each tax year. Just like normal ISAs, there will be no tax to pay on any interest or gains.

The money in a Junior ISA belongs to the child, but they cannot take the money out until they are 18. They can then decide what they want to do with it. If the child chooses not to take the money out, the Junior ISA will automatically become an ISA. For further information please e-mail advice@prosperis.co.uk