This is our guide to Individual Savings Accounts and how to make the most of the annual tax year allowance. If you would like to discuss any of the information provided in more detail, call on 0191 4066453 or click here to email me.

ISA Guide 2010/11

This is our guide to Individual Savings Accounts,  for 2010/2011, and how to make the most of the annual tax year allowance. If you would like to discuss any of the information provided in more detail, please contact me on 0191 4066453.

“An ISA sits over your choice of investments to shelter them from further tax.”

What is an ISA?

ISA stands for Individual Savings Account, a tax-efficient wrapper offered under Government legislation as a way of encouraging you to save. An ISA sits over your choice of a number of different investments to shelter them from further tax on any income or gains earned.

There are just two types of ISA - the Cash ISA and the Stocks and Shares ISA – and the combined allowance for both in 2010/11 is £10,200.

Within this, the limit for Cash ISAs - or for the cash element within a Stocks and Shares ISA - is £5,100. However, there is flexibility over how these limits can be used - you can, for example, put the maximum £5,100 in a cash account and £5,100 in a stocks and shares account. Alternatively, though, if you place just £2,000 in cash, you can use the entire remaining balance – £8,200 in this case - to invest in stocks and shares. If you don’t need cash at all, you can put the full £10,200 into stocks and shares.

In addition, you can transfer existing Cash ISA holdings to a Stocks and Shares ISA without impacting on your current tax year allowance. So, if you have £10,000 already sitting in existing cash ISA plans then this amount can be moved to a Stocks and Shares ISA, yet leave your entire current tax year allowance still available for new investment.

This guide is designed to help start you on the road to building an investment portfolio. With a little consideration, a balanced, well-diversified portfolio should weather the short-term storms of stock market and property market fluctuations. It will smooth out the many peaks and troughs and help you meet your financial objectives over the longer term without causing too many shocks along the way.