ISA Rules Change

In August 7, 2014
On ISA, News
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You will remember the unexpected announcement by the Chancellor in the budget regarding changes to ISAs, which have come into effect now and the NISA (this stands for New ISA!) came into effect on 1st July 2014, when all ISA’s will become NISA’s. Existing ISA (now NISA) holders do not need to do anything, as changes will be made automatically. However, new NISA’s will require new documentation.
There are a number of differences, but the most important changes are:

  • Cash can now be held in Investment NISAs, ending the difference between Cash and Investment NISAs.
  • The present limit of £11,880 has increased to £15,000 per NISA.
  • Any Corporate Bonds can now be held, where previously there was a minimum maturity period of 5 years.
  • 16 –18 year olds can hold both NISAs and JISAs, giving them a total potential Investment of £19,000.

Looking at the rules, it seems that either the drafting is incorrect or the effect of allowing 16 –18 year olds to hold both JISAs and NISAs wasn’t considered, so we would expect this to be corrected in the future. Therefore, if any 16 – 18 year olds want to contribute the £19,000 we recommend that you do so before the Autumn Statement.

To NISA or not to NISA? That is the Question:

All of the changes covered and put to one side, the big question is whether you should even use the NISA or not at all? So many people will blindly follow the crowd and the media, ultimately taking a very important financial decision without ever discussing with a qualified Financial Planner whether or not this is the right Investment for them.

Of course, they are tax efficient in some areas but this has to be looked at in context. If your overriding priority is for Capital Gains Tax and Income Tax efficiency, then of course use them fully. If on the other hand, your overriding priority is Inheritance Taxation, then there are better alternatives. If your overriding priority is Care Fee Planning, then again there are better alternatives.

The other important factor, is what sort of Investment strategy to take? Are you looking for capital growth or income or both? What timeframe are you planning to hold the Investment for? And very critically, you need to consider just how much Investment risk you are prepared to accept. These are all often very important questions which many people pay little or no attention to at all, instead simply being led down a path of assuming that just because it is a ISA or NISA that they should have one.

Avoid Instruction Takers:

This also is often where things can go very wrong indeed. There is an old saying that goes “any fool can take an instruction”. Which by and large, is probably quite true in most cases and circumstances; tragically all too often, banks and building societies as well as some Financial Advisers, will simply take the easy way out when their customer says to them “I would like to put £15,000 into my NISA please”. All they simply do is ask one or two questions, fill in some forms and hey presto – you now have your annual allowance setup. Whereas what they should be doing is asking questions like: why do you want to put £15,000 into your NISA? What growth rate do you need or want to achieve? Would you like it to be above inflation? Because the reality is that if you are going to get true advice, then the professional will ask you many more questions before giving a recommendation of the actions that should be taken.

Not many of us would dream of going to our doctor sitting down and saying I would like you to prescribe XYZ medicine for me, or I would like you to operate on me. Most of us would think it is madness to even do this, because your doctor is a specialist and your doctor has spent many years being trained in all fields of medical practice, as well as specialism areas. This is absolutely no different than taking professional Financial advice, and whilst we would certainly recommend you always put your health above your wealth, the reality is that you can and should look after both without detriment to the other.

If you are concerned about this or any other area of planning and would like to speak with a consultant, then please contact us on 01489 877547 to book a no obligation Initial Consultation.

 

Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. Past performance is not a guide to future performance. Tax rules can change at any time.
Please remember your home or property may be repossessed if you do not keep up repayments on your mortgage. We give clients the option to pay for mortgage advice by fee rather than commission. Equity Release refers to lifetime mortgages. To understand the features and risks, ask for a personalised illustration.
The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto Enrolment, Tax Advice and Estate Planning.
The opinions contained within this blog, do not constitute financial advice and no action should be taken based on this content alone.

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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Redwood Financial Family Wealth & Estate Planners Ltd is Directly Authorised and regulated by the Financial Conduct Authority. FRN number 774469.

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The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto-Enrolment, Tax Advice and Estate Planning. Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. https://register.fca.org.uk/

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