Investors and Savers: Individual Savings Accounts (ISAs)

Posted by siteadmin on Tuesday 22nd of March 2016.

The annual ISA investment limit for 2016/17 will be unchanged at £15,240, but in 2017/18 will jump to £20,000. The limit for the Junior ISA (JISA), which is attracting more university-fee-planning investors, will stay at £4,080 for 2016/17. 6 April will see the launch of the Innovative ISA, which allows investment in peer-to-peer (P2P) lending. This potentially offers higher rates than the miserable yields on cash ISAs, but without security of capital or any deposit protection scheme coverage. From the same date new flexibility will be introduced to cash ISAs, allowing you to replace any amount of withdrawn money without it counting towards your ISA allowance, provided the replacement occurs in the same tax year. This feature has been added because the arrival of the personal savings allowance, offering up to £1,000 of tax-free interest, has reduced or eliminated the benefits of a cash ISA for many savers.

Nevertheless, ISAs remain one of the simplest ways to save tax, with nothing to report or claim on your tax return. The annual limit may be modest, but over time substantial sums can build up: if you had maximised your ISA investment since they first became available in April 1999, you would by now have placed over £150,000 largely out of reach of UK taxes.

Remember ISAs are now inheritable by surviving spouses or civil partners, a process which is due to be simplified later in 2016 to avoid any income or CGT during the estate administration period. 

Year End Planning: The forthcoming dividend and personal savings allowances mean that your ISAs may need to be reviewed. It makes sense to do this as part of any year end top up.