It was less than four months ago that George Osborne announced that ISAs would be replaced with ‘New ISAs’ (NISAs).
The news was overshadowed by the pensions reforms, so as a reminder, here is what the rules are now:
- All ISAs became NISAs on 1 July 2014.
- The maximum contribution into a NISA is £15,000 in 2014/15. This is reduced by any amount you have already invested in ISAs in the current tax year.
- The full £15,000 can be invested in a cash NISA or a stocks and shares NISA, or you can mix and match between the two. You will still be able to arrange two separate NISAs – a cash NISA and a stocks & shares NISA.
- The £15,000 limit also applies to cash NISAs for 16 and 17 year olds (who can also have a £4,000 Junior ISA).
- Interest on cash held in a stocks & shares NISA is now tax free, whereas before it was subject to a flat 20% charge.
- It is now possible to switch from the stocks & shares component to the cash component. A move in the opposite direction has long been possible, but until 1 July it was a one-way trip. Now you may switch between them.
- Investment rules for stocks & shares NISAs have been slightly relaxed in the wake of the changes to the cash interest rules. For example, retail bonds with terms of less than five years can now be held in a stocks & shares NISA.
These changes will mean new product developments, with some providers planning to incorporate both cash and stocks & shares components within a single NISA.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. Tax laws can change.