The New Individual Savings Accounts (NISA)

If you are a higher rate taxpayer then you should give serious consideration to using your annual investment allowance to invest in an Individual Savings account (ISA) if you have funds available.

They are still worth considering for basic rate taxpayers, but the tax advantage is obviously not so great.  George Osborne announced in this year’s budget that there would be significant changes to ISAs with effect from 1 July 2014. From that date all existing ISAs will become New ISAs (NISAs).

The most significant change is the increase in the maximum amount that can be invested into a NISA during the tax year. With effect from 1 July 2014 the maximum amount is now £15,000 and this can be invested in Cash, Stocks and Shares, or any combination of the two. Prior to 1 July 2014 only half of the maximum subscription into an ISA in each tax year could be held in cash and the remainder had to be invested in stocks and shares. The annual limit for 2014/2015 (before these changes were announced) was a total of £11,880 of which £5,940 was the maximum that could be held in cash.

As part of the transitional rules to the NISAs, any amounts that have already been paid into an existing ISA between 6 April 2014 and 30 June 2014 will count towards the new £15,000 NISA subscription limit for 2014/15. It is also worth noting that, if you have paid into a Cash or Stocks and Shares ISA since 6 April 2014, you will not be able to open a further NISA of the same type (i.e. Cash or Stocks & Shares as the case may be) before 6 April 2015. You may however make additional payments into the existing account up to the new £15,000 NISA limit if your account provider allows that or transfer the account to another provider.

As was the case previously, a Stocks & Shares NISA will only be able to be opened by those aged 18 or over.  For those aged between 16 and 18, a Cash NISA can be opened and, from 1 July 2014 the same maximum investment of £15,000 can be made into that Cash NISA during the 2014/15 tax year.  That is in addition to any amounts that can be paid into a Junior ISA that such individuals may also hold.  The maximum amount that can be paid into a Junior ISA (which are available to individuals aged under 18) is increasing to £4,000 per annum with effect from 1 July 2014, up from the previous limit of £3,840.  Remember though that for a Junior ISA, once deposited, the funds belong to the child and are locked in until they reach 18. If you are depositing funds on behalf of your cute toddler remember that your respective views on what those monies might be usefully used for when they reach 18 might be very different!

As always with investments of any kind, you would be well advised to seek advice from your bank or an Independent Financial Adviser before making or planning your investments.

The above is for general guidance only and no action should be taken without obtaining specific advice