ISA’s and PEP's

ISA’s

Individual Savings Accounts (ISA’s) were introduced by the current Government in the 1999/2000 tax year to replace the PEP and TESSA products established under the Conservatives. The PEP principles of tax-free growth were retained for ISA’s, as was the tax-free interest offered by TESSA’s on deposit accounts. However, ISA’s should not be seen as a continuation of PEP’s and TESSA’s. ISA’s were introduced by the Government to encourage people to put money aside for the future.

Subject to specific limits you can split your ISA between 2 different components. Within the shelter, all returns will be free of income tax and CGT and you may withdraw your investment at any time without loss of tax relief. As the tax benefits are so good the Government has put a limit on the amount you can save in each tax year. So, not only do you have the flexibility to invest tax efficiently in 2 different ways, when you invest in the stock and shares component, you can now choose from a wider range of global funds than previously allowed through PEP investment including property, gilt, bond and fixed interest funds.

Investors must be over 16 for the cash component and 18 for the stocks and shares. When you invest in an ISA you have a choice of investing in a Maxi ISA or a Mini ISA.

Maxi ISA
A Maxi ISA allows you to invest up to £7,000 in any tax year. The maximum you can invest in each component is:

Cash – up to £3000
Stocks and shares – up to £7000

Mini ISA
A Mini ISA allows you to divide your investment between two different ISA managers. So you could decide to invest in stocks and shares with one manager and a cash component with another. The maximum you can invest in each is:

Cash – up to £3000
Stocks and shares – up to £4000

It is important to remember that you cannot invest in a Maxi ISA and a Mini ISA in the same tax year.

The principle benefit of investing in an ISA is that there is no CGT to pay on any investments within the ISA and no personal liability on income tax, even if you are a high rate taxpayer. From April 2004, dividends will be fully taxable, although there will be no further tax liabilities, even for higher rate taxpayers. However, investments in corporate bonds and gilts are free from tax and the provider is able to reclaim the full 20% tax credit. Income taken from an ISA is totally free from income tax even for a higher rate tax payer.


PEP’s
Although Personal Equity Plans (PEP’s) can no longer be bought by new investors, there are still many investors who hold PEP’s which they invested in over the late 1980’s and 1990’s.

So, even though PEP’s may be seen as ‘old news’, many people have built up and retained substantial PEP portfolios. Because of this existing PEP’s should be regularly reviewed to ensure they are meeting investor’s requirements. In addition your PEP and ISA units can be re-registered on a fund platform. This means that you can retain all the tax benefits and the same number of units but only need to refer to one place for valuations and investment administration.

TRANSFERRING FROM ONE MANAGER TO ANOTHER DOES NOT IN ANY WAY AFFECT THE FAVOURABLE TAX STATUS THAT THESE INVESTMENTS ENJOY AND CAN BE EASILY ADMINISTERED BY USING A FUND PLATFORM - ASK FOR FULL DETAILS
 

We offer an extremely competitive service, so for more information regarding ISA's or PEP's contact us on:
Telephone: 0115 945 5199   Fax: 0115 982 6250
Between 8.30am and 5.30pm Monday to Friday to discuss your requirements.

E.mail: info@davidburnell.co.uk
and we will find a cost effective solution for you.

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David Burnell Financial Services Ltd
1 Albert Road, West Bridgford, Nottingham, NG2 5GS

Tel: 0115 945 5199   Fax: 0115 982 6250
Email: info@davidburnell.co.uk

David Burnell Financial Services Limited is an appointed representative of IN Partnership the trading name of the On-Line Partnership Limited which is authorised and regulated by the Financial Services Authority.

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