It’s not just the cost of living and taxes which have been rising lately. For the 2011/12 tax year, the amount of money you can invest into a tax-efficient ISA has increased to £10,680. At a time where finances are being squeezed ever tighter, investing in an ISA offers you the potential to make more of your money.
Every UK adult has an annual allowance, which they can utilise to shelter a portion of their investments – and the returns they generate – from the Taxman. With interest rates on more traditional bank and building society accounts remaining at historic low levels, it’s never been more important to make the most of your allowance.
Your 2011/12 ISA allowance can be either invested entirely into a Stocks & Shares ISA, or up to £5,340 can be placed into a Cash ISA
A Stocks & Shares ISA involves investing your money into a combination of assets, usually via a collective investment fund or trust. The type of investments your money is placed in usually includes company shares and gilts (loans to the British Government, which it uses for public spending). Although there is an element of risk to your capital, the potential for higher returns is greater over the medium to longer-term.
Meanwhile a Cash ISA is operated like any regular savings account, as you receive a fixed rate of interest and usually have easy access to your money. This is typically a better place for storing money you might require in the near future; but as the potential to generate high returns is usually more limited compared to a Stocks & Shares ISA, a Cash ISA may not be suited for achieving your medium to longer-term financial objectives.
Despite their tax-efficient benefits, usage of ISAs remains relatively low. According to research by Nationwide Building Society^, for the 2011/12 tax year, 26% of people in the UK don’t plan to use any of their Cash ISA allowance and 40% have no intention of utilising any of their Stocks & Shares ISA allowance. This may be partly explained by 39% wrongly-believing they would have to pay tax on the returns their money earned.
Yet the tax-efficient nest egg you could build up from using your annual ISA allowance could be considerable over time. As an example, if you had invested your maximum allowance for the last 10 years, assuming an average growth rate of 4%, you would have built a nest egg of £94,419 compared to £79,260 from a regular deposit account paying 4% annually*. That’s a difference of £15,159.
NAHT Personal Financial Services can help you to make the most of your 2011/12 ISA allowance
Provided by our specialist financial partner, Skipton Financial Services (SFS), you can utilise your ISA allowance by investing online through their Fund Supermarket – and benefiting from 0% initial commission.
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They have over 1,100 Funds from 60 different Fund Managers available to choose from.
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To help you make informed decisions, they have up-to-date fact sheets detailing the Top Selling and Highly Rated Funds.
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They also have simple tools and guides to help you make the right investment choice for your needs.
If you require investment advice or help using the Fund Supermarket, call us on 0800 012 1248.
Please note: the Stocks and Shares ISA products offered through SFS are not like Building Society/Bank deposit accounts as they can rise and fall in value and your capital is at risk.
The tax treatment of any investments depends on your individual circumstances and may be subject to change in the future.
^ Source: Nationwide Building Society
*Assumes Capital Gains Tax allowance already utilised elsewhere in year of encashment, 4% growth after charges, an 18% tax rate and that the full allowance was invested on day one of new tax year.
It’s not just the cost of living and taxes which have been rising lately. For the 2011/12 tax year, the amount of money you can invest into a tax-efficient ISA has increased to £10,680. At a time where finances are being squeezed ever tighter, investing in an ISA offers you the potential to make more of your money.
