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Individual Savings Accounts (ISAs) - A New Regime

ISAs were launched on 6th April 1999 to replace Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs). Since their inception, the rules that govern them have, with the odd exception, remained largely unchanged.

Their availability has been extended twice due to continuing popularity and the 3 mini ISAs became 2 when the insurance mini ISA was abandoned due to very poor take up. There have also been changes in regards to acceptable investments, with property unit trusts becoming allowed. Rules applying to existing PEP holdings were also changed to synchronise the investment options.

Proposed in the Pre Budget Report on 9th October 2007 and confirmed within the Budget announcement on 12th March 2008, a number of changes will take effect from 6th April 2008.

The annual allowance will increase from £7,000 to £7,200.

Mini & Maxi ISAs will no longer exist. Instead you are able to invest into a cash ISA and a stocks & shares ISA.

The whole £7,200 can be invested into a stocks & shares ISA or up to £3,600 can be invested into the cash ISA with the remainder into a stocks & shares ISA.

Mini cash ISAs, TESSA only ISAs (TOISAs) and the cash component of maxi ISAs will automatically become cash ISAs.

Mini stocks & shares ISAs and the stocks & shares component of maxi ISAs will automatically become stocks & shares ISAs.

Existing PEP holdings will automatically become stocks & shares ISAs.

Existing cash ISA holdings may be transferred into stocks & shares ISAs without affecting current years ISA allowances.

Stocks & shares ISA holdings may not transfer into cash ISAs

Due care should be taken particularly in regard to the ability to transfer monies from a cash ISA into a stocks & shares ISA. This is undertaken as a normal ISA transfer would be and not by making a withdrawal from the ISA account. Not only would this cause you to lose the associated tax benefits on those monies, this would be treated as new monies with the new provider and would count against annual allowances.

The advent of the new rules can be considered an excellent opportunity to revisit investment strategies and review existing holdings against both expectations of performance and attitude to investment risk.

Fund supermarkets have proved popular allowing clients to achieve a wide degree of investment diversification without the administrative burden that would normally have ensued. As such, we have undertaken many consolidation exercises with clients, either by way of transfer or re-registration, thus allowing portfolios to be reviewed and, where appropriate, restructured or rebalanced with relative ease.

Please feel free to contact us should require any advice in such matters. Our Financial Services Partners, Jeff Crewdson, Steve Prosser and Chris Raggett will be happy to assist.

Date of Article: 28th March 2008

 
Tim Warr - Warr on...
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Our website is a regulated business territory site. Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Tim Warr on 0161 477 6789 or email us at info@warr.co.uk.