Pembroke Wealth Management: 
Individual Savings Accounts ( ISAs )
"An ISA is simply a tax efficient 'wrapper' that surrounds a specific investment, such as a unit trust, shares or cash savings account."
ISAs are available to all UK residents over 18 years of age. 16 years of age for the Cash ISA. They benefit all taxpayers, especially those paying at the higher rate. Any income or capital gains from investments held within an ISA do not have to be declared to the tax man.
ISAs were introduced in 1999 and replaced PEPs (Personal Equity Plans) and TESSAs (Tax Exempt Special Savings Accounts).
You can invest into a variety of components within an ISA but essentially the choice is either Cash or Stocks and Shares - the latter can include Unit Trusts or Investment trusts, Open Ended Investment Companies (OEICs), Gilts (bought with at least 5 years until maturity) or any share quoted on a stock exchange recognised by the Inland Revenue.
For the current 2010/2011 tax year, you can invest a maximum of £10,200 into an ISA within that year .
You can choose to do this by combining up to a maximum of £5,100 into a Cash ISA with the remainder in a Stocks and Shares ISA or by putting the entire £10,200 into one Stocks and Shares ISA.
Cash Mini ISAs and TESSA only ISAs automatically became Cash ISAs. PEPs automatically became Stocks & Shares ISAs.
Tax efficient?
- All growth on investments held within an ISA is tax-free. You do not have to pay Capital Gains Tax (CGT).
- When you receive income from an ISA there is no additional tax to pay. This means that you can enjoy interest payments from cash and corporate bonds tax-free. Higher rate taxpayers avoid paying a further 22.5% tax on the net dividends received. Please note that the 10% tax credit on UK equity dividends is no longer reclaimable within an ISA.
Legislation relating to Individual Savings Accounts is subject to frequent change.
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