With the end of the Tax Year now only 10 weeks away, anyone who hasn’t, as yet, made a payment to their ISAs needs to make contact with us urgently so that we can arrange for illustrations and applications to be prepared.
Remember - if you don’t use your ISA allowance it can not be carried into the next tax year. You lose your eligibility to invest £7,000 in a tax efficient manner!
Pre-Budget Report - 2006
The following note provides a summary of some of the key aspects of the pre-Budget report. Please remember this is still subject to change before being enacted as part of this year’s Finance Act.
The Government is keen to build on the success of ISAs to meet its objective to develop and extend the savings habit. They are proposing the following changes to the PEP and ISA regimes:
Bringing PEPs within the ISA wrapper:
The aim is to enable investors to integrate their stocks and shares investments within the ISA wrapper and so manage their funds more effectively, reduce administration costs for providers and rationalise the savings landscape. The Government will align the qualifying investments regime for the wrappers by allowing investment trusts with rental income to be held in ISAs (currently only allowed for PEPs) and will also allow funds that were held in PEPs to be invested in the full range of ISA qualifying investments.
Whilst PEPs and stocks and shares ISAs are primarily vehicles for equity investment, savers are allowed to hold some uninvested cash in their accounts. There are currently differences in the way the interest earned on uninvested cash is treated in PEPs and the stocks and shares component of ISAs. In a PEP , such interest is only subject to tax if more than £180 of interest is withdrawn from the PEP per tax year, whereas all interest earned on cash held in a stocks and shares ISA is subject to a 20% flat rate charge. The treatment of interest earned will be brought into line for both types of wrapper and the ISA rules are to apply to all uninvested cash held in PEPs.
The Government also proposes that on a given date all PEP accounts will become stocks and shares ISAs and as such, PEPs will cease to exist. However, providers that currently offer both PEPs and stocks and shares ISAs will not be forced to amalgamate individual clients’ accounts into one ISA account.
Removing the Mini/Maxi distinction and limits:
The Government will remove the distinction between Mini and Maxi accounts. The aim is to simplify the ISA regime making it easier to understand, administer and increase the flexibility for savers.
The Mini and Maxi labels will cease to exist and savers will instead be able to contribute to two components: cash and stocks and shares. They will be able to hold one of each component per year with either the same or different providers. The overall annual investment limit will remain at £7,000 and savers will be able to invest up to £3,000 in cash and the balance in stocks and shares. For example, an individual will be able to save £1,000 in cash with one provider and £6,000 in stocks and shares with the same or a different provider.
Transfers from cash into equity ISAs:
The Government proposes to allow individuals to transfer funds from cash subscribed in previous tax years to the stocks and shares component without affecting their annual investment limit. The aim is to further promote share ownership by encouraging savers to diversify their assets and benefit from the potentially higher returns offered by stocks and shares over the medium to long term.
- For further information on any of the above, please contact the office on 01772 326800.
Transact Interest On Cash Deposits:
The annual rate of interest on cash deposits between 7th December 2006
and 6th January 2007 was 4.35% gross |
