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Financial > Investments > ISAS
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ISAs - Individual Savings Account
This type of scheme shelters your savings and investments from both UK Income Tax and Capital Gains Tax.
Any withdrawals that you make from your ISA are also free from Income Tax and Capital Gains Tax, so they don't have to be declared on a tax return.
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You can start to use an ISA for cash savings from the age of 16, and from the age of 18 years for investments such as stocks, shares, collective investments like unit trusts, open ended investment companies, investment trusts, gilts and bonds.
Investments tend to grow more quickly than cash deposits over longer periods of time.
The tax concession provided by an ISA is clearly very valuable to savers and investors, and so Her Majesty's Revenue & Customs ration the benefits each year.
You can
:
Save up to £3,000 in a mini cash ISA and
Invest up to £4,000 in a mini equity ISA
or,
Invest up to £7,000 in a maxi equity ISA
To help Her Majesty's Revenue & Customs monitor the system to make sure the annual limits are not broken by anyone, you can only use one ISA manager per tax year for each of those 3 types of ISA.
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Before the ISA became available in 1999 there were 2 different types of tax sheltered savings and investment schemes.
Cash investments could be held in a tax-exempt special savings accounts, known as a TESSA, and investments could be held in a Personal Equity Plan, known as a PEP. Those investments had time limits on them, but there are no time restrictions - either minimum or maximum - applying to ISAs.
When a TESSA matured, savers were allowed to transfer all of the cash they had paid into their TESSA into a TESSA only ISA (TOISA) but all of the interest earned had to be taken out.
If you had a PEP in the past there were restrictions affecting the investments that you could choose, but those have now been lifted so the rules are exactly the same as they are for an ISA.
For investors with PEPs who wanted to change the manager, they were allowed to transfer the entire proceeds of their PEP into either a PEP transfer plan or alternatively an ISA and there was no requirement for the profit to be removed.
New For 2008
You will be able to switch some or all of your mini cash ISAs into equity ISAs using a transfer plan, from 6th April 2008.
Please remember though that this is 'one way traffic' - you will not be able to move back out of equities into a cash ISA. If you want to go back into cash, there will be no ISA tax shelter on that money for the future.
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