Individual savings accounts update

Kesh Liladhar and James Cheetham urge GPs to get ready for streamlined ISAs from 6 April.

As the end of the tax year approaches, the annual individual savings account (ISA) selling frenzy is well under way. Investors do not have to pay income or capital gains tax on ISA investments, so they make sense for 40 per cent taxpayers like most GPs.

For the 2007/8 tax year, the maximum you can invest in an ISA is £7,000. The full allowance can be put in an equities maxi ISA. Alternatively you can save up to £3,000 in a cash mini ISA plus up to £4,000 in an equities mini ISA. You cannot carry over unused ISA allowance to 2008/9, so use it by 5 April or lose it.

Changes ahead
From 6 April the mini and maxi ISA distinction will go. The annual allowance will rise to £7,200 of which a maximum £3,600 can be saved in a cash ISA. It will become possible to, say, save £2,000 in a cash ISA and £5,200 in an equities ISA from the same or a different provider.

You will be able to transfer some or all your mini cash ISA savings in previous tax years to equity ISAs, without affecting your annual ISA allowance. You can also transfer cash ISA savings made in the 2007/8 tax year to an equities ISAs (but not vice versa).

Transfers must be for the whole amount saved in the tax year up to the date of transfer. You can then add further savings until you use up the annual allowance of £3,600 in cash and £7,200 overall. Savings transferred should pass directly from ISA provider to provider because cashing in and re-investing will count towards your annual allowance.

Smart savings
You should consider the implications of the new rules for your investments. Review your future ISA funding strategy and bring it in line with the higher annual allowance.

Decide whether the current balance between cash and equities ISAs is still appropriate and look at the performance of the funds your existing mini/maxi equity ISAs are invested in.

Think about future ISA withdrawals of capital or income to meet needs such as retirement. It may be wise to consult an adviser who specialises in doctors' finances and who can also include other factors such as the NHS Pension Scheme changes from April 2008 in their review.

Mr Liladhar and Mr Cheetham are medical specialist independent financial advisers at Bailey Beaumont Financial Solutions Ltd, (01476) 400027 or admin@baileybeaumont.co.uk

ISA investment limits
Maximum investment until 5 April 2008

Up to £7,000 in equities (e.g. shares) maxi ISA per year.

OR

Up to £3,000 in cash mini ISA plus £4,000 in equities mini ISA.

Maximum investment from 6 April 2008

Up to £7,200 in equities ISA

OR

Up to £3,600 in cash ISA with up to remaining balance in equities ISA. Maxi/mini ISA distinction removed.

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