introduction to ISAs Your guide to investing in ISAs

Transcription

1 introduction to ISAs Your guide to investing in ISAs

2 2 what is an ISA? ISA is short for Individual Savings Account. With most forms of saving and investment, any income received or gains you make are subject to tax. This can make a significant dent in the overall return you receive. An ISA enables you to invest without having to pay any further income tax or any capital gains tax on any profits you make. ISAs do not have to be reported on tax returns, and you can withdraw your money at any time.

3 3 What types of ISA are there? There are three kinds of ISA: A Cash ISA, as the name suggests, is like a savings account. The big difference being that any interest you earn is free of tax. An Innovative Finance ISA enables you to earn income by investing in Peer to Peer loans (please note that we do not offer Cash ISAs or Innovative Finance ISAs). A Stocks & Shares ISA also does pretty much what it says on the tin and more. You can invest in a variety of ISA-eligible investments, including naturally stocks and shares. But you can also invest in: Funds Investment trusts Gilts Bonds Exchange Traded Funds Exchange Traded Commodities If some of these terms sound a bit daunting, don t worry. The important thing to know is that any income you receive from dividends is free of any further income tax and any capital gains you make are free of Capital Gains Tax.

4 4 What s your ISA allowance? The Government sets an annual ISA allowance (ISA limit) on how much you can invest in an ISA each tax year (6 April to 5 April the year after). Please go to share.com to check your allowance for this tax year. The full amount can be invested in a Stocks & Shares ISA, a Cash ISA, an Innovative Finance ISA (or any combination of the three). Unused ISA allowances don t roll over to the next tax year if you don t invest the full amount, so it s a case of use it or lose it. However, your ISA itself doesn t end when the tax year does, so you can keep adding to it each year and get the benefits on the cumulative amount. Don t forget to invest your ISA allowance at the start of the tax year (6 April) to make the most of it. Transferring your ISA to us You can easily transfer any ISAs you have with other providers to us. We ll even pay up to 300 towards any transfer costs you may incur (conditions apply). Whatever you do, don t withdraw your money from one ISA to pay in to another, since you ll lose the tax benefits. Simply complete an ISA transfer form available in the forms section of our website or call us on Do I have to do it all at once? There s absolutely no obligation to use your annual ISA allowance in one lump sum. Most companies will have minimum amounts they will accept for each investment, but regular investing is a quick and easy way to build up your portfolio, and it usually works out cheaper in terms of dealing commission. You do, however, need to ensure that incurring multiple purchase costs for periodic small investments doesn t make this approach inefficient. Another significant advantage of regular investing is that it removes the danger of buying in at the top of the market. Technically this is known as Pound Cost Averaging, but in straightforward terms it means that the price you pay averages out over the course of the year. ISAs with us are flexible Need temporary access to your money? If you withdraw some money from an ISA with us, you can replace it in the same tax year without losing the tax benefits (conditions apply).

5 5 Many people are now using ISAs as part of their retirement planning, in conjunction with their pension. How do ISAs fit into my long term financial planning? To answer this question, let s start by looking at the differences between pensions and ISAs. When you pay into a personal pension plan, the government gives you tax relief on your contributions. This is very tax-efficient, especially if you are a higher-rate taxpayer. In addition, the money in your pension pot grows tax-efficiently. When you retire, you are normally allowed to take 25% of your pension pot as a tax-free lump sum. The balance of your pension pot can be used to buy an annuity (a regular income for life), withdrawn, or you may be able to draw down income from the pot. Whichever option you choose, this income is taxed. The big difference with ISAs, however, comes when you withdraw money. At this point it is paid out with no further income tax or any capital gains tax liability. In a nutshell, with a pension the tax relief comes up front, with an ISA it comes at the end. Many people are now using ISAs as part of their retirement planning, in conjunction with their pension. The other big advantage with an ISA is that you can take out your money at any time. With a pension, your money is tied up until you retire, or at least until you reach a certain age. So an ISA does offer more accessibility than a pension. All in all, ISAs can be a key element in a wellbalanced financial plan. ISAs work more or less exactly the other way around. Any money you pay into your ISA comes from your taxed income, so you ve already paid tax on it. Like a pension, the money in an ISA then grows tax-efficiently.

6 6 Our Ready-made ISA has no administration fee and no dealing fee, so all of your money is invested. Is there only one sort of Stocks and Shares ISA? At The Share Centre we offer two types of Stocks and Shares ISA. Ready-made ISA If you re not sure what to invest in, or want an account that doesn t need actively managing, then this ISA could be for you. Self-select Stocks & Shares ISA Our Self-select Stocks & Shares ISA is for anyone who s happy making their own investment choices, and wants complete control. It s designed to make it easy to purchase any of the wide range of ISA-eligible investments we mentioned earlier. You pay a fixed administration fee, which makes it cost-effective as well as simple. Our Ready-made ISA has no administration fee and no dealing fee, so all of your money is invested. It invests in our sister company Sharefunds SF Portfolio of Funds. Our three ready-made packages of funds are designed to cater for different investment objectives with their associated, varying degrees of risk. All you have to do is choose the package which fits the type of investor you feel you are Cautious, Positive or Adventurous and there s a ready-made fund to match.

7 7 A dealing option to suit you We have two cost-efficient dealing options to choose from. If you invest infrequently for smaller amounts, then our Standard dealing option will probably suit you. However, if you trade frequently or have a lump sum to invest, then our Frequent dealing option, for a quarterly administration fee, gives you a fixed rate of dealing commission, which could save you money. It s quick to set up, and easy to manage You can open an account online in a matter of minutes at share.com. Then as soon as you transfer some money into your account you can start investing. It s your choice whether dividends are re-invested, paid out as income or retained as cash. You can keep track of your ISA s performance and manage your account securely online at or over the phone if you prefer. We ll also send you account statements twice a year. At share.com you ll also find plenty of practical tools and advice for researching the markets and making informed investment decisions.

8 8 Please remember Tax allowances depend on your personal circumstances and the benefits of ISAs could change in the future. Bear in mind also that you should never invest in something purely for the tax advantages. The value of any investment can fall as well as rise, and you might not get back your initial investment. So you should have a clear view of your attitude to risk, and select your investments accordingly. Next Steps For further information on our ISAs and the product features and charges, visit Alternatively, you can speak to our customer service team, who will be happy to answer any questions you have. We have two cost-efficient dealing options to suit you.

9 9 PO Box 2000 Aylesbury Buckinghamshire HP21 8ZB phone deal fax web The Share Centre Ltd is a member of the London Stock Exchange and is authorised and regulated by The Financial Conduct Authority under reference number Registered in England number Registered office Oxford House Oxford Road Aylesbury Bucks HP21 8SZ. isa 0317