ISA returns of the year

Sheltering your returns from tax

As we enter a New Year, the tax clock is ticking and the countdown to the end of the financial year on 5 April approaches with increased vigour. If appropriate to your situation, one way in which you could hold a wide range of investments and shelter your returns from tax is to take advantage of an Individual Savings Account (ISA).
Within an ISA gains are tax free and there is no tax to pay on the income. (Since April 2004, the 10 per cent tax credit on UK dividends cannot be reclaimed, regardless of whether the shares are held directly or within a collective investment scheme.)

You don’t have to mention ISAs on your tax return. Inside the ISA wrapper you can also switch your investments whenever you like, but this could possibly lead to a switching charge. Currently, you can invest invest up to £7,200 in this financial year, which runs from 6 April to 5 April the following year. Any UK resident over 18 can invest (over 16 for Cash ISAs).

From 6 April 2008, the ISA rules changed. Mini and Maxi ISAs were replaced with Cash ISAs and Stocks and Shares ISAs, and the annual allowance rose to £7,200. This means you can invest up to £7,200 in a Stocks and Shares ISA, or up to £3,600 in a Cash ISA with the balance (within the overall limit) in a Stocks and Shares ISA.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investment can go down as well as up and you may not get back the full amount invested.