Skipton Financial Services urges UK to think ISA
Andrew Barker, chief operating officer at Skipton Financial Services, commented: "Whereas the HMRC are quick to hit you with stealth taxes, your annual ISA allowance is one tax-efficient gift the Government do give you and it should be an essential part of every investment portfolio. Only around a third of the UK adult population currently hold an ISA with many of these failing to top up the account on a yearly basis. Therefore, with the end of the current tax-year looming, we would urge people to take advantage of their full ISA allowance, or risk losing it forever and further lining the Chancellor's pockets with your hard-earned money.
"Once you have made a decision to use your ISA allowance, you have many options available to you. One of these is a Cash ISA, available through banks and building societies. However savers have been deserting these accounts with interest rates held at an all-time low of 0.5% for 22 months, since March 2009. In many cases, rates offered on cash ISAs are now lower than the net rates offered on standard deposit accounts, making the tax-perk not worth the time and effort.
"In a welcome boost for diligent ISA investors, following an announcement made in last year's Budget, each April ISA allowances will now rise, based on the rate of inflation in September. Therefore, from 6 April this year, you can invest £10,680 in a Stocks and Shares ISA (up from £10,200) or £5,340 in a Cash ISA (up from £5,100.
"It is worth remembering that, whilst you can only save a maximum of £5,340 into a Cash ISA, you can invest twice as much into a Stocks and Shares ISA, which allow you to invest in a variety of equity-based investments, depending on your risk profile. With the UK facing a further prolonged period of rock-bottom rates on savings accounts, a stocks and shares ISA looks very appealing. All investment portfolios need an element invested in cash but for those with a medium to long-term horizon, if you are prepared to ride the short-term volatility and take a bit more risk, this is a great opportunity to increase the returns from your ISA and maximum this Government allowance. It makes sense an investment point of view and, with taxes likely to rise in the coming years given the state of the nation's finances, it definitely makes sense from a tax point of view. I would encourage investors to shelter the maximum in an ISA away from the taxman, as no one knows if ISAs will be around forever.
"Many people are still unaware that it is possible to transfer Cash ISA balances into Stocks and Shares ISAs, despite this rule coming in on 6 April 2008. For the people who have invested the maximum in a Cash ISA since they were started for the 1999/2000 tax-year, they would have sheltered away £36,300 in their Cash ISA, plus interest. With the top Cash ISA rates now not even 3%, transferring their balance into a Stocks and Shares ISA would be a way to potentially improve returns on this sum. It is important to bear in mind though that, unlike deposits, investments can go up and down so your capital could reduce. Also, whilst you can transfer from Cash ISA to Stocks and Shares ISA, you are unable to transfer the other way.
"We are passionate that people should utilise their full annual ISA allowance but for many people, they do not have a spare £10,680 hanging around the house and looking for a home! However, one other thing that many people do not realise is that, if you have collective investments or shares already invested outside of an ISA, may be able to move this to within an ISA wrapper, up to the maximum allowance each tax year. Therefore, currently a couple investing £100,000 would be able to shelter the maximum £20,400 in an ISA immediately (£10,200 each) but would be able to have the whole £100,000 within an ISA wrapper within five years' time, by simply contacting their financial adviser. Through our unique MII proposition, Skipton Financial Services offers an ISA Transfer Facility where it enables this process to happen free of charge by clients returning a simple pre-populated transfer form posted to them each tax-year.
By visiting sfsinvestdirect.co.uk, investors can use their ISA allowance and pay 0% initial commission, with a choice of over 1,000 funds from over 60 different fund managers.