Tax and your investments

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26. ISAs

Individual Savings Accounts (ISAs) were introduced in April 1999 and replaced Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs).

An ISA is not an investment in its own right but is a tax-exempt wrapper in which you can hold your direct investments and funds to shelter them from capital gains tax.

• You can invest up to £7,200 a year in a tax-free environment (rising to £10,200 in 2010, and earlier in October 09 for over-50s)
• There is no overall limit in amount or minimum or maximum time limit
• The fund builds up, free of capital gains tax
• In most cases you can withdraw your money at any time tax free
• You can hold a broad range of direct equity and bond investments as well as investment funds
• You can also allocate some of your allowance to tax-free deposits and to life assurance funds

Apart from your pension plan, the ISA is the most important and easily accessible annual tax break on savings for any UK resident who is over 18 (16 and 17-year-olds can deposit up to £3,600 a year in a cash ISA; again, rising to £5,100 in 2010).

1. Keeping it legal 2. How HMRC treats your investment income 3. Keeping records 4. The basis of dividend income 5. Dividend income 6. Interest income 7. Interest on Treasury Stock 8. Capital gains tax basics 9. Base cost 10. Indexation 11. Taper relief 12. Indexation and taper relief - together! 13. Date of acquisition 14. Disposal proceeds 15. Disposal of a holding with a history 16. Takeovers 17. Bonus/scrip issues 18. Share splits 19. Buybacks 20. Rights issues 21. Share options 22. Beneficiaries and minors 23. Calculating your CGT liability 24. Using your annual CGT exemption 25. Transfers between spouses 26. ISAs 27. Delaying capital gains 28. Other tips to reduce CGT liability 29. Conclusion