Saturday, 10 October 2009

ISA's make the sun shine in October!

A little ray of sunshine in the Chancellor’s Budget of 2009 was the proposal to increase personal investment limits to ISA plans. With no significant increases since Individual Savings Accounts were launched almost ten years ago, this was crying out for attention.

The new rules mean that:

• For the over-50’s it became possible earlier this week to invest £10,200 in total into your ISA per tax year.

• For the rest of us we shall have to wait till the new tax year next April for the enhanced limits.

• In addition it became possible earlier this year to transfer your accumulated Cash-ISA investments into Stocks & Shares ISA plans without compromising your current year’s allowances – attractive given the poor deposit rates currently available.

This is broadly excellent news, as investors have been able over recent years with the old £7,200 annual Stocks & Shares allowance to build portfolios that become increasingly tax-efficient over the years as their ISA allowance absorbs more and more of their potentially taxable investments.

A couple over 50 can now invest £20,400 per year into ISAs. For those of us with that amount of ready funds to invest this makes an extremely attractive proposition but in fact it should have far wider appeal than that. For investors with historic investments into Unit Trusts, Open Ended Investment Companies (OEICs) and even Investment Bonds there has always been the prospect of perhaps morphing these less tax-efficient holdings into their ISAs over a period of years. The recent changes simply allow us to increase the rate of travel in the direction of ultimate tax-efficiency by a factor of 50%. The next tax year will see this freedom extended to all investors.

Most decent providers are allowing existing investors who might have made maximum use of the ‘old’ allowance to take advantage of the increase, but even if this is not the case there is the prospect of an ISA Transfer to a provider who is more flexible, followed by a further contribution to the new limit for those who are not so blessed.

The ISA is here to stay and now offers even greater scope to invest in a highly efficient tax environment. You should speak to your Financial Adviser to be sure that the funds you utilise make best use of these tax advantages and are appropriate to your risk philosophy.