What is an Individual Savings Account (ISA)?
Individual Savings Accounts (ISAs) were introduced in 1999 to replace Personal Equity Plans (PEPs), with the aim of encouraging personal savings through tax free investment. An ISA is a very efficient tax free investment and for most should be the first choice for their tax free saving. Capital gains taken within an ISA are not subject to tax and any income taken from an ISA is not subject to income tax.
You can invest up to £5,100 cash in a Cash ISA or you can have up to £10,200 in a Stocks and Shares ISA, a combination of the Cash ISA and Stocks and Shares ISA is permitted, but the total must not exceed £10,200.
There is no upper limit on what your ISA investment can grow to. ISAs can be ideal for growth investments and / or for income investments although investing in the stockmarket carries the risk that the value of your investments may go down as well as up. Stocks & Shares ISAs are available to individuals aged 18 or over, who are resident and ordinarily resident in the UK for tax purposes. All ISAs must be held individually, you cannot have a joint ISA.
We explain what an ISA is, what you can invest in an ISA and what makes the Killik & Co ISA different.
ISA tax free investing versus alternative cash savings vehicles:
| ISA | Life Assurance Bonds | Ordinary Bank Accounts | |
| Annual contribution limits | Annual ISA investment allowance is £10,200. | No limit | No limit |
| Income tax | UK dividends are received in an ISA net of a 10% tax credit, which cannot be reclaimed. However, no further tax is payable on income retained in the ISA or if it is taken out. | Income tax paid by Life Insurance Company at the rate of 20% with Bond. If higher rate tax payer additional 20% income tax payable. | Taxed at 20% or 40% for higher rate tax payers. |
| Investment choice | ISAs offer a wide investment choice including most global listed securities, bonds and funds. | Limited to funds offered by a Life Insurance company. | No investment choice. |
| CGT | No CGT | No CGT | No CGT |
What to do next
Read about the benefits and risks associated with an Individual Savings Account (ISA).
ISA Review Service: If you would like one of our qualified Brokers to review all your current ISA investments, without charge, please call us on 020 7337 0520.
Request our ISA Brochure: Read more about the Killik & Co ISA by requesting our free ISA brochure, electronically or by post.
ISAs explained: For further information about ISAs and tax free investments, please request your free copy of ISAs explained.
