With just 4 weeks to go to utilise your ISA allowance for 2010/11 I thought it would be useful to give you some information about them and why they can be useful.

What is an ISA?

An ISA is an Individual Savings Account which is completely free of both Income Tax and Capital Gains Tax. There is no minimum limit, no lifetime limit or minimum lock-in period.

Who can have an ISA?

ISA's are available to all individuals aged 18 or over, resident and ordinarily resident in the UK.

Types of ISA's

An ISA can be:

1. A Cash ISA - cash usually held in a bank/building society Cash ISA account
2. A Stocks and Shares ISA - contains shares & securities.

Each account may contain a Single Premium Life Assurance policy.

Investment Limits

Individuals can subscribe up to £10,200 in total for 2010/11, of which a maximum of £5,100 can be in cash. So the individual can have 1 cash ISA and 1 Stocks & Shares ISA a year.

Individuals between 16 and 18 can only invest £5,100 in a cash ISA.

Account Transfers

The investor can transfer the whole of his current year subscription with or without the whole or part of earlier years subscriptions to a new ISA account in his own name. Stocks and Shares Accounts can only be transferred to other Stocks and Shares ISA accounts not into Cash ISA's.

Tax Exempt

Within an ISA account income and gains are tax-free, even if withdrawals are made from the account.

Time Limits for Subscription

The annual allowance for this tax year must be invested by 5th April 2011, being the end of the tax year. If you do not invest in this year the allowance for 2010/11 is lost .

Tax Tip

Consider transfering cash or stocks in accounts that are currently taxed into an ISA to shield them from tax. You will then receive income gross rather than net and you will not need to worry about gains.  

7 March 2011