Best Isa - Your Guide To The Best ISA's On The Market

best isa account

best isa explained So we've looked at both the maxi and the mini isa, the rules, regulations and factors that you need to be aware of before investing your hard earned cash in the markets, and whether this is the best isa for you. Sadly this is not the end of the story as the current government in it's infinite wisdom has decided to change the rules yet again. Indeed at one point in the last 2 years, there was the distinct and real possibility that ISAs would be phased out completely. I am delighted to say that this is no longer the case following an outcry from various sectors of the finance industry, and the government has now backed down over these plans. ISAs are here to stay for a few years longer, and with the current changes now being introduced, I see no reason why they will not be around for the foreseeable future, even if we do have a change of government in the next few years. So what are the proposed changes, and how will they affect you, either as anew investor, or as someone who is holding either maxi or mini isas. Let me guide you through the new rules.

isa account rule changes

As from April 6th 2008, the isa rules have changed, and to quote from the governments policy document - " these changes are designed to deliver certainty, simplicity, and flexibility for saver" - only time will tell!!  In effect maxi and mini isas will no longer exist, and have been replaced with a cash isa, and a stocks and shares isa. I will explain what you may or may not need to do in a moment if you already hold these isas, but let's take a look at the new rules which are now current.

The first change, and probably the simplest is the fact that the annual allowance for tax free saving has now been increased from £7,000, to £7,200 - hardly a figure to set the pulses racing, but never mind - something is better than nothing. The remaining changes are a little more complicated so let's start with the first of these which states that according to HM Treasury, ISA's will be available indefinitely which is good news. The remaining changes I have highlighted with examples as it will probably make things clearer for you - so let's start with the first change which is on the amount you can invest and in which market.

best cash isas & best 'stocks and shares isa'

The first difference is that of the new allowance. Up to 50% ( £3,600 ) can now be invested in a cash isa, and the remainder in a stocks and shares isa. These can be with the same or different suppliers. Suppose you opened a cash isa, with an initial £1,200, then during the course of the year you decided to invest further to reach the maximum of £7,200, then you would have several choices as follows :

1. Top up the cash element to the maximum of £3,600

2. Open a stocks and shares isa and invest the remaining £6,000

3. Top up the cash isa to £3,600 and invest £3,600 in a stocks and shares isa

4. Any combination of the above where the cash isa does not exceed £3,600

5. The above isas can be with the same or different suppliers

We could of course simply have decided to open a stocks and shares isa and invested the full £7,200 allowance. This would prevent us from opening a cash isa in the same tax year as we are now at our maximum allowance.

best isa account - transferring from previous years

Now this is an important point  and it relates to transfer of savings from previous years. In a nutshell you will be able to transfer some or all of the money saved in previous tax years in cash isas, into the new stocks and shares isas, without affecting your annual ISA investment allowance. So supposing you had built up £ 9,000 in cash isas in previous years, and were planning to invest your full allowance of £7,200 in a stocks and shares isa, then the full £9,000 could also be transferred into two stocks and shares isas, to give you a total of £16,200 invested in the stock market, tax free.

best isa - transferring from current year

A further change relates to the transfer of savings from a cash isa to a stocks and shares isa during the current tax year. As an example assume you had saved the maximum of £3,600 in a cash isa mid way through the year. You would now be able to transfer this to a stocks and shares isa, with the option of then investing further in the stocks and shares isa, the cash isa back to the maximum, or a combination of both. Far more flexible than under the old rules.

best isas - PEP's

As from the 6th April 2008 all PEP's will automatically become stocks and shares isas. No further action is required by you, and the change does not affect your annual allowance in any way.

best isas - best mini and maxi isas

From the 6th April 2008 Mini cash isas and the cash component of a Maxi isa will automatically become cash isas. The same principle will apply to stocks and shares, so mini stocks and shares isas, and the stocks and shares element of a Maxi isa will automatically become a stocks and shares isa. You do not need to do anything in order for this to happen.

OK, that's covered the new rules, which personally I feel have simplified the situation, and also confirmed that ISAs are here to stay. Now let's look at the costs and charges for setting up and managing an isa, and the questions you need to ask to get the best isa, before signing on the dotted line!

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