Individual Savings Account (ISA)
The ISA is a tax efficient medium for investing into shares and cash. ISAs are of two types - Maxi ISA and Mini ISA - and in any one tax year investors may subscribe to either one Maxi ISA (through a single manager) or up to two Mini ISAs (through up to two different managers).
To maximise your equity (share) exposure you will need to invest into a Maxi ISA where up to £7,200.00 per individual can be invested into shares. Shares are suitable for those seeking exposure to the stockmarket, in order to secure the prospect of medium to long term capital and income growth. However, investing into shares does involve risk. Limited guarantees are available and values can fall, sometimes alarmingly. The professional fund managers will invest into a broad range of shares (typically between 50 -100 different companies) in order to spread the risk and opportunity.
Alternatively you may invest up to £3,600.00 into the cash portion of your ISA with the balance into stocks and shares.
From a tax point of view the ISA is completely free of capital gains tax (CGT), however, in April 2004 the 10% tax credit on equity dividends was abolished and can, therefore, no longer be reclaimed. Higher rate taxpayers have no additional tax liability on dividends. On encashment the proceeds are not liable to any further tax.