Individual Savings Accounts (“ISA”) Print

ISAs are tax-exempt savings plans.

From 1st July 2014, there is no longer any restriction to the amount that may be paid into a cash ISA. For the period from 6 April 2014 to 30 June 2014, the maximum annual investment was £11,880 of which £5,940 could have been invested in a cash ISA.

For 2015/16 the maximum annual investment has been increased to £15,240. This will also be the annual subscription limit for 2016/17.

There is no upper limit to the amount that may be accumulated within an ISA. No minimum investment limit has been set, and there is no limit on the period during which an ISA may be held. Only individuals who are aged over 18, who are resident, and ordinarily resident in the UK, are eligible to hold ISA accounts, although individuals aged over 16 are able to hold a cash account only.

Shares acquired under approved profit sharing, or SAYE schemes may be transferred into an ISA at market value, with no CGT liability on the transfer. However, shares issued on demutualisation or under public offer are not eligible to be transferred into an ISA.

Qualifying investments in an ISA enjoy exemption from both income tax and CGT.

In the Autumn Statement on 3 December 2014 the Chancellor announced that where an ISA saver dies, that individual’s spouse or civil partner will be entitled to an additional ISA allowance equal to the value of the saver’s ISAs. This will enable the transfer of the ISA funds of the deceased into the survivor’s ISAs where the income and gains of those funds will remain tax exempt.

A further relaxation is that from 6 April 2016 an individual can make a withdrawal from his ISA, and provided the money is replaced within the same tax year the tax benefits will not be lost.

From 1 December 2015 the Help to Buy ISA is being launched which will enable prospective first time buyers to save up to £200 per month towards their first home. An initial deposit of up to £1,000 may be made when the account is opened in addition to the normal monthly savings, although there is no need to make any initial deposit. The government will contribute 25% of the amount saved up to a maximum contribution of £3,000. The minimum amount that must be saved to qualify for the contribution is £1,600, so the minimum contribution from the government will be £400.

Help to Buy ISAs will be available to individuals who are aged 16 and over for 4 years, but once the account has been opened there is no time limit on the savings period.

A further relaxation is that from 6 April 2016 an individual will be able to make a withdrawal from his ISA, and provided the money is replaced within the same tax year the tax benefits will not be lost.

From 1 December 2015 the Help to Buy ISA was launched which enables prospective first time buyers to save up to £200 per month towards their first home. An initial deposit of up to £1,000 may be made when the account is opened in addition to the normal monthly savings, although there is no need to make any initial deposit. The government will contribute 25% of the amount saved up to a maximum contribution of £3,000. The minimum amount that must be saved to qualify for the contribution is £1,600, so the minimum contribution from the government will be £400.

Help to Buy ISAs are available to individuals who are aged 16 and over for 4 years, but once the account has been opened there is no time limit on the savings period.

The bonus will be paid when the first home is purchased and will be available on homes costing up to £450,000 in London and up to £250,000 outside London.

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