ISAs

What is an ISA and how much can I invest?

An ISA (Individual Savings Account) is a financial ‘envelope’ into which you can place investments to give them a tax efficient status. Until 5th April 2009, your total annual limit to an ISA is £7,200.

What investments can I hold inside an ISA?

Subject to the overall limits, you can split your ISA between the following components:

• Stocks and shares
  You are able to invest in stocks and shares within an ISA up to £7,200 p.a.
• Cash
  You have the option of holding a proportion of your ISA allowance in cash, which will earn tax-free interest. You are able to deposit £3,600 in cash p.a.

What is the tax position of ISAs?

All investments and deposits held within an ISA are free from income and capital gains tax.

What are the advantages of investing in the stocks and shares option of an ISA?

The stocks and shares element of the ISA will allow you to take advantage of the pooled resources and broad spread of risk offered by a collective investment that brings together the shares of many companies.

The stocks and shares element is usually invested in unit trusts. These will usually be actively managed by a professional fund manager who will buy and sell shares on your behalf, with the aim of achieving the maximum possible return on your investment.

In the past, over the medium to long term, this type of investment has produced a decent level of growth, although it is important to remember that past performance is no guarantee for the future, and the value of such investments can fall as well as rise.

What is the minimum investment period of an ISA?

There is no minimum investment period, however, it is important to remember that any investment in stocks and shares should be considered as a medium to long term investment.

It is also important to consider any costs or penalties that may be imposed by different providers should you wish to surrender or cash in your ISA.