HOW MUCH CAN I INVEST IN AN ISA GUIDE |
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The most you can
invest in an ISA in any one tax year is £7,000. It doesn't matter what happens
to the money once it's safely inside the ISA. What's important is that you can
only contribute a total of £7,000 each tax year.
So this means you
can't put in £7,000 early in the year, take out £3,000 and put in
£2,000 later on. You've already put in your £7,000 for the year and
that's it. At that point you've used up your ISA allowance for that year. This
means you need to make sure, wherever possible, that you don't put in money that
you might need in the short term, otherwise you might waste some of your allowance.
Remember that the
tax year runs from April 6 to April 5. After April 5, you can either continue
paying in the same ISA for the next tax year, or you can open a different ISA.
Your original ISA from this tax year will continue, protected from tax, until
you decide to withdraw your cash or investments. However, if you've opened a new
one you won't be able to add any more money to the old one once the tax year is
complete - remember, you can only contribute to one ISA in any one tax year, however
many you have open. If you're paying by direct debit and you don't wish to open
the same ISA for the next tax year remember that you'll need to cancel the payments,
otherwise you'll be stuck with the same ISA again.
The government
has said that the £7,000 limit will apply until the 2005/6 tax year and
it has also said people will be able to contribute to ISAs until at least 2008/9.
What happens then? It seems reasonable to assume that ISAs, or a similar tax-free
savings vehicle, will continue be available as ISAs have proved to be remarkably
popular. But we shall have to wait and see.
With ISAs there
are restrictions on how much you can put into each component.
Cash component
- £3,000
Shares component - £3,000
Insurance component - £1,000
However, there
is one special rule regarding the Maxis. The government seems to favour shares
so, if you want, you can put your ENTIRE £7,000 allowance just into the
shares component. Bear in mind this means that if you take the Mini route, you
are restricted to £3,000 in cash, £3,000 in shares and £1,000
in insurance. It's only if you choose the Maxi route that you're allowed to put
all of your £7,000 into shares.
When
To Invest
A large proportion
of the money invested into ISAs is put in the last few weeks of the tax year.
Some people even deliver cheques by hand on April 5! For cash ISAs this is less
relevant but for share ISAs it makes much more sense to drip the money in steadily
over the course of a year. If you're investing in a fund they will probably have
set up a monthly or quarterly savings scheme via direct debit. This avoids the
problem of investing all your money at one time and hence reduces the risk that
you might catch a temporary peak in the stock market.
ISA
guide
How much can I invest in an ISA
Mini and Maxi ISA guide
CAT standard ISA guide
Cash ISA guide
Share ISA guide
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