What’s new with ISAs in 2016/17?

There’s been several changes to ISAs over the last couple of years with Junior ISAs, and most recently Help to Buy ISAs being introduced. Ranjit Virk, an investment adviser with Essential Money, explains more here... An Individual Savings Account is an annual allowance offered by the Government to allow an individual to save and avoid paying income or capital gains tax. The current allowance for the 2017/18 tax year is £20,000 per person. There are two different types of ISAs available; a Cash ISA and a Stocks and Shares ISA. The Cash ISA is available to anyone over the age of 16. For the Stocks and Shares ISA you have to be over 18. You can use one provider annually for each ISA and split the allowance between the two types of ISAs.

Any interest earned on the Cash ISA is tax free and does not need to be declared on a tax return. For the Stocks and Shares ISA the money can be invested in shares of companies, unit trusts, corporate and Government bonds. Once the investment has been made you can withdraw the money if needed (some Cash ISAs have a notice period) but it does not reset your allowance. You can also transfer previous ISA investments from older tax years. Money can be transferred to a new Cash ISA or to a new Stocks and Shares ISA. You can also transfer between a Cash and a Stocks and Shares ISA. The main reason you may want to review the management of your ISA is cost. This has become an important area of focus for all investors, especially people with larger investments of stocks and shares investments.

Junior ISAs

This ISA is available to anyone under the age of 18 who does not have a Child Trust Fund. The maximum investment allowable each year is £4,080. The child will take control of the investment at 16 but cannot withdraw the money until they reach 18. The money can be invested in a Cash or Stocks and Shares ISA (or a mixture of both).

Help to Buy ISAs

This ISA was introduced in Autumn 2015 and is available to savers looking to purchase their first home. The investment can be started with a one off £1,000 investment then the maximum that can be saved is £200 pm. The maximum investment that can be made each year is £12,000. The good news is the Government will boost this to £15,000 when you buy a property. The investment is not limited to a purchase but if two people are buying their first home together they can both save the money and will both get the additional bonus when the property is bought. The maximum value of the property is restricted to £450,000 in London and £250,000 outside of London to qualify for the bonus. This type of investment is only available through banks and building societies and will not be offered through a stocks and shares type investment. 

Lifetime ISAs

You can put in up to £4,000 each year, from age 18 to 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. The Lifetime ISA limit of £4,000 counts towards your annual ISA limit. You can hold cash or stocks and shares in your Lifetime ISA , or have a combination of both. There's a 25% charge to withdraw cash or assets from a Lifetime ISA .