Explaining the New Range of ISAs
In March 2014 the British Chancellor of the Exchequer, George Osborne, proposed a new set of ISAs and in his Summer Budget of July 2015 the ISA changes were confirmed. It has left many people with existing accounts or who were hoping to open a new one in the coming months with a few questions.
Dubbed a ‘Nisa’ by some, the changes came into play during April 2016 for many of the ISA changes. In total, seven new ISAs will be introduced under the Chancellor’s plans. While this provides a lot more choice for investors it can also complicate things and leave you with a few questions.
If you’ve already opened an ISA or two and are happy with how it’s going, whether a stocks and shares ISA or a cash ISA then don’t worry, many long-established types of ISAs will remain. Cash ISAs will continue working like a tax free bank account, with an annual allowance of £15,240 before it is bumped up to £20,000 on April 6th 2017.
Plus you are no longer restricted to placing just half of your annual allowance into a cash ISA, with the rest going into stocks and shares. Now the full £15,240 can go into a cash ISA, stocks and shares or still be split.
Finance ISAs are new, designed as a tax-efficient way to invest in peer-to-peer products and include a higher rate of interest. Anything up to £15,240 can be invested in these. Then there’s the Help to Buy ISA which launched in December 2015.
This means it is in the range of available ISAs for the new tax year for the first time. You cannot contribute to a cash ISA and Help to Buy ISA in the same year, and anything invested makes up part of the £15,240 allowance.
What’s still to come?
The Help to Buy ISA will only be available until 2019, as by that time it will have been replaced by the new Lifetime ISA. These will not be available until the next start of the tax year in April 2017.
Anyone under the age of 40 can open one to save cash or invest in stocks and shares. Up to £4,000 can be invested each year, with the government paying in an extra 25% until the age of 50, as part of the annual ISA allowance (£20,000 by that time). Hopefully this makes some of the new ISA options and changes a bit clearer for those hoping to invest.