An Individual Savings Account (ISA) is a tax efficient savings vehicle introduced by the government in April 1999 to replace PEPs and TESSAs. Under the current regulations you have no further liability to income tax or capital gains tax in respect of your investments held within an ISA. Please note that new ISA rules came into force on 6 April 2008. Download our guide to ISA changes for more information. The section below explains what an ISA is and its current benefits.
| Requirements to invest in an ISA |
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You can invest in an ISA provided:
| Tax advantages of an ISA |
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There are currently three major tax advantages to investing in an ISA:
There is no minimum investment period needed to qualify for these tax benefits.
| Maxi ISAs and Mini ISAs |
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On 6 April 2008, Mini and Maxi ISAs were replaced by Cash ISAs and Stocks and Shares ISAs. Mini Cash ISAs and the cash components of Maxi ISAs were reclassified as Cash ISAs. Mini Stocks and Shares ISAs and the stocks and shares components of Maxi ISAs were reclassified as Stocks and Shares ISAs.
The definition of stocks and shares (for a Stocks and Shares ISA) can include unit trusts, investment trusts, open ended investment companies, investments on any recognised stock exchange, corporate bonds, shares held in a savings related share option scheme and gilts. Whereas, a Cash ISA can include bank & building society accounts, cash unit trusts, national savings products (excluding national savings certificates and premium bonds) and money market deposits.
| ISA investment limits |
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The investment limits for an ISA, applicable from 6 April 2008 are:
Investment ISA limit
Stocks and shares £7,200*
Cash £3,600
*Less amount invested in a Cash ISA. Investment may be made as a lump sum or through regular savings. Up to £3,600 of the total ISA alowance of £7,200 can be saved in a Cash ISA with another provider. New Star does not offer a Cash ISA for new investment.
To learn more about our ISAs, we recommend that you talk to a financial adviser. All of our New Star funds can be held in an ISA, with the exception of the New Star Heart of Africa Fund and, for new investors, the New Star Money Market Unit Trust.
| Questions and answers about New Star ISAs |
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1. What are my main New Star ISA investment options?
From 6 April 2008, you are able to invest in one New Star Stocks and Shares ISA each tax year. The annual investment allowance has risen to £7,200 per tax year. Up to £3,600 of that allowance can be saved in a Cash ISA with another provider - New Star does not offer a Cash ISA for new investment.
2. Can I choose a New Star Cash ISA as a new investment option?
No. New Star does not offer a Cash ISA for new investment. Existing ISA holdings in the New Star Money Market Unit Trust, however, are maintained as New Star Cash ISAs and can be transferred to a Stocks and Shares ISA should you wish.
3. Can new investors choose a New Star Money Market Unit Trust ISA?
For new investors, the New Star Money Market Unit Trust is no longer available as a New Star ISA fund option.
4. What happens to my existing New Star ISA?
Mini Cash ISAs and the cash components of Maxi ISAs have all been reclassified as Cash ISAs. Mini Stocks and Shares ISAs and the stocks and shares components of Maxi ISAs have been reclassified as Stocks and Shares ISAs.
5. Do I have to sign any new forms if I want to continue paying into my New Star ISA?
No - as long as you:
If, however, you did not sign a continuous application form or if you did not save in your ISA in the 2007-8 tax year, you will have to complete a new ISA application form.
6. What happens to my New Star PEP?
All New Star PEP accounts automatically became New Star Stocks and Shares ISAs on 6 April 2008. No action is required by investors.
7. How much can I transfer from my Cash ISA to a New Star Stocks and Shares ISA?
From April 2008, you can transfer some or all of the money you have saved in previous tax years without affecting your annual ISA investment allowance. You are able to transfer money saved in the 2008-9 tax year. You must transfer the value of that Cash ISA up to the day of the transfer. These transfers are subject to the terms and conditions of your Cash ISA provider. Please remember that you must not withdraw the money and invest it in your Stocks and Shares ISA yourself, as it will count against your annual ISA investment allowance.
8. If I transfer all of my 2008-9 tax year Cash ISA subscriptions to a New Star Stocks and Shares ISA, can I make any further payments to my ISA in the 2008-9 tax year?
Yes, provided you have not already used up your annual ISA investment allowance of £7,200.
9. How do I transfer the money from my Cash ISA to a New Star Stocks and Shares ISA?
You will need to select New Star as the Stocks and Shares ISA provider for your ISA. As the new provider, New Star will arrange the transfer. You must not withdraw the money and invest it in a New Star Stocks and Shares ISA yourself, because it will count against your annual ISA investment allowance.
10. Can I transfer the money I have invested in my New Star Stocks and Shares ISA into a Cash ISA?
No. The ISA rules have been changed to allow the transfer of money saved in a Cash ISA to a Stocks and Shares ISA, but not vice versa.
11. Can I still transfer my Cash or Stocks and Shares ISA held with one provider to New Star?
Yes. New Star does, however, not accept new investments into a Cash ISA, so only transfers into a New Star Stocks and Shares ISA are available. We suggest you contact a financial adviser. If you do not have a financial adviser and require the services of one, you may find the website www.unbiased.co.uk useful.
12. Have the qualifying investments of ISAs and PEPs changed?
The qualifying investments rules of the ISA have not changed. Former PEP investments, however, are able to invest in the full range of wider qualifying investments, including insurance and stakeholder products.