Individual savings accounts (ISAs)
Proposals made in the Budget
Help to Buy: ISA
To help as many people as possible realise their aspirations of home ownership, the Help to Buy: ISA was announced at Budget 2015. This supports people saving up for their first home by providing them with a maximum government bonus of £3,000 on £12,000 of savings. The government confirmed in the Summer Budget that Help to Buy: ISAs will be available for first time buyers to start saving into from 1 December 2015. First time buyers will be able to deposit £200 per month into their Help to Buy: ISA at participating banks and building societies. First time buyers will be able to open their Help to Buy: ISA accounts with an additional one off deposit of £1000 so that they can start saving now.
More radical changes were announced in relation to ISAs generally – all bringing a welcome change and even more product flexibility.
Extending ISA eligibility
The government will introduce the Innovative Finance ISA, for loans arranged via a P2P platform, from 6 April 2016 and has today published a public consultation on whether to extend the list of ISA eligible investments to include debt securities and equity offered via a crowd funding platform.
Making ISAs more flexible
March Budget 2015 announced that the government will change the ISA rules in the autumn to allow individuals to withdraw and replace money from their cash ISA in-year without this replacement counting towards their annual ISA subscription limit. This policy will also cover cash held in stocks and shares ISAs. These changes will commence from 6 April 2016.
The increase in the investment limit combined with the increased flexibility of the ISA, while valuable to all who qualify, will be particularly welcome for those who are:
- higher rate taxpayers
- additional rate taxpayers and/or
- restricted on relievable pension contributions or increased benefits because of existing provision.
The value of an ISA as a means of investing tax effectively for higher and additional rate taxpayers is well known. Those affected by the reduced annual allowance and restriction of tax relief will appreciate that there is little financial appeal in either making a contribution to a pension arrangement that attracts no tax relief or benefiting from an employer contribution or scheme accrual that triggers a tax charge while paying tax on the emerging payments from a pension arrangement at (possibly) 40%/45%. This is especially so where the investor can secure tax free growth and income within the ISA.
Since 5 August 2013, it has been possible to invest in AIM shares through ISAs. This gives the investor the opportunity to benefit from a double tax break – firstly on the tax-free status of ISAs and then again on death by virtue of inheritance tax business property relief which is available on certain AIM/ISDX stock that have been owned for 2 years.
The increased upper limit of £15,240 (which will apply from 6April 2015) equates to £30,480 for a married couple each year and over 10 years, with no increases, equates to £304,800!
It is also possible to put a further £4,080 per annum into a Junior ISA for a child who qualifies. Parents and grandparents who require more control over when the child gets access to the investment may prefer to mirror a JISA investment pattern by investing regularly into ordinary (non-ISA) collectives subject to a trust or, for those with capital, into an offshore bond. Both types of investment could be held in a suitable trust.
If you would like more information please email us on