INDIVIDUAL SAVINGS ACCOUNT GUIDE 6th April 2008 will bring changes to the ISA rules, when the annual allowance will be raised to £7,200. Up to £3,600 can be invested in a cash ISA and the balance in a stocks and shares ISA with the same, or a different provider. So, for example, if an individual invests £2,000 in a cash ISA, he/she could then invest £5,200 in a stocks and shares ISA. Any UK resident or ordinarily resident individual can invest in an ISA (individuals must be over 16 to have a cash ISA and over 18 to have a stocks and shares ISA). The terms ‘maxi’ and ‘mini’ ISA will disappear. Investment can be made by a lump sum, a regular or an irregular payment. Current mini stocks and shares ISAs – and the stocks and shares part of maxi ISAs will automatically become stocks and shares ISAs. Current mini cash ISAs, TOISAs and the cash part of maxi ISAs will automatically become cash ISAs. All Personal Equity Plans (PEPs) will also automatically become stocks and shares ISAs and will be able to invest in the full range of ISA investments, including insurance and stakeholder products. It will be possible to merge these with your existing stocks and shares ISA if required. It will also be possible to transfer some or all of the monies saved in a cash ISA (including a TOISA) into a stocks and shares ISA – but not vice versa. If an investor transfers ISA cash monies from a previous tax year, this will not affect his/her current annual ISA allowance. Investors can also transfer monies saved in the current year but this must be the whole amount. Provided an investor has not used up the whole of their £7,200 annual allowance he/she can then make further payments. If an individual invested £1,000 in a cash ISA in 2008/9 and then transferred this to a stocks and shares ISA, they would still be able to invest an additional £6,200 – this could be split £3,600 into cash and £2,600 into stocks and shares or all in stocks and shares – when an investor transfers a current year’s cash ISA into a stocks and shares ISA, it is as if the original cash ISA investment was never made. It is also possible to transfer cash ISAs between providers and stocks and shares ISAs between providers. These must be done direct between the providers – otherwise it will count towards the current annual allowance. Please note that, although there is no personal income or capital gains tax on any ISA investment, tax of 20% must be deducted from any interest earned on un-invested cash within a stocks and shares ISA before it is paid out (and this will also now apply to former PEPs). This guide is our understanding of Individual Savings Accounts as at 6^th April 2008. These details are subject to change. The tax relief’s available are also subject to change and their value depends on individual circumstances. The value of your investments and income from them can go down as well as up and you may not get back your original investment.

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