What is an ISA? (Individual Savings Account)
Individual savings accounts (ISAs) were introduced in April 1999 and replaced personal equity plans (PEPs) and tax exempt special savings schemes (TESSAs).
An ISA is not an investment in its own right but is a tax-efficient wrapper in which you can hold your equities, bonds, collective investments and funds to shelter them from income and capital gains tax.
Apart from your pension plan, ISAs are the most important and easily accessible annual tax break on savings for any UK resident.
How much can you put in an ISA?
The overall ISA investment limit is £7,200 per tax year (in 2008/9) which can be spread between stocks & shares and cash. But there are limits on the maximum amounts that can be allocated to each component and they vary according to the kind of ISA you take out.
| Investment Component |
Amount |
| Stocks and Shares ISA |
maximum £7,200 |
| Cash ISA |
maximum £3,600 |
|
Stocks & Shares |
leaving a balance of £3,600 |
If you allocate £2,000 to a Cash ISA, you can put £5,200 into a shares and shares ISA. If you allocate nothing to a Cash ISA, you can put the full £7,200 into a stocks and shares ISA.
The BRI ISA
The BRI ISA is a stocks and shares ISA. This type of ISA may be suitable for clients that wish to invest in company shares (equities), bonds, unit trusts, OEICs and investment trusts.
If you would like any further information about BRI ISAs including terms and conditions please contact us.
You must be a UK resident aged eighteen or over to apply for a stocks and shares ISA.
What are the Tax Benefits of a BRI ISA ?
- 20% withheld tax on bonds is reclaimed by BRI
- No capital gains tax on profits from disposals within your ISA
- No minimum holding period to qualify for the tax benefits
- BRI deals with all administration reducing the records you need to keep to a minimum
- Dividends, interest and gains do not need to be reported on tax returns
- Higher rate tax payers do not have any further tax liability
Warning
You must not subscribe more than £7,200 in total to a stocks and shares ISA and a cash ISA in the same tax year. If you open a cash ISA you will have restricted the investment amount that you can invest into a stocks and shares ISA.
The levels and bases of taxation can change and the taxation benefits associated with ISA investment may be withdrawn by changes in legislation. The reliefs from personal taxation are those currently available and their value depends on the individual circumstances of the investor. The proceeds from the ISA in the form of capital appreciation or income will be free of all personal liability to the investor of both income and capital gains tax. (However, the underlying investments may be liable to corporation, income and capital gains tax, which cannot be reclaimed by the manager).