ISA

What is an ISA

An ISA is a wrapper around a cash or share account that enables gains to be tax free. I am interested in shares so have subscribed to a Maxi ISA which allows me to put ?7000 per tax year into it. Each tax year I can add another ?7000 cash into it to buy shares. ISAs have been referred to as a 'tax wrapped' product. The ?7000 limit increases each year.

I'm currently using HSBC InvestDirect for my ISA. Dividends are only paid in cash (no scrip dividends allowed).

You cannot transfer shares from a normal trading account into the ISA share account. You have sell then buy again, incurring transaction fees.

Cash left in the the Maxi ISA gathers interest - but an automatic 20% is removed on the interest. This is to deter people from opening a Maxi ISA and not buying shares. If you want to get cash interest then you should have opened a mini cash ISA (the limit on these about half, ?3000).

HSBC ISA Product FAQ

ISA Allowance limits

From 6 April 2008, the new limit is ?7200 (up from ?7000).

The 2011-2012 ISA allowance is ?10680 for a Stock & Shares ISA, and ?5340 for a Cash ISA.

Junior ISAs

From 1 November 2011 you can open a junior ISA for your child. This is similar to a adult ISA where capital gains and dividends are not taxed. You cannot withdraw any money until the child is 18 years of age. The limit for tax year ending 2012 is ?3600. This replaces Child Trust Funds.

directgov Junior ISA page