Important information about PEP & ISA investments from 6th April 2008 and 6th October 2009
From 6th April 2008 a number of changes will be introduced that affect investments held in Personal Equity Plans (PEPs) and Individual Savings Accounts (ISAs). The changes are intended to simplify the existing regime and make the rules easier to understand. A summary of the changes is shown below:
1. New investment limits
From 6th April 2008 the limits for new ISA subscriptions will increase as follows:
| OLD INVESTMENT LIMITS | NEW INVESTMENT LIMITS | ||
| Cash | Up to £3,000 |  | Up to £3,600 |
| Stocks & Shares | Up to £7,000 | | Up to £7,200 |
| Overal total annual allowance | £7,000 | | £7,200 |
The annual ISA investment allowance has now risen to £7,200 per tax year. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in a stocks and shares ISA with either the same or another provider.
This means you could invest, say, £2,200 in a Cash ISA and £5,000 in a Stocks and Shares ISA thereby using your total ISA allowance of £7,200.
2. Mini & Maxi ISAs to go
In order to simplify matters, the distinction between Mini and Maxi ISAs will disappear from 6th April 2008. (Thank goodness!) From then on there will be just Cash ISAs and Stocks and Shares ISAs - subject to the investment limits above.
3. The opportunity to transfer your Cash ISAs into Stocks and Shares ISAs
When the new regulations come in to force, you'll be able to transfer money held in Cash ISAs into Stocks and Shares ISAs without affecting your annual allowance. This means that cash you may have accumulated over the years (including that held in TOISA accounts) can be transferred to Stocks and Shares ISAs without losing the tax free status. Whether or not this will be appropriate will depend on your circumstances and investment objectives.
4. PEPs become ISAs
From 6th April 2008, PEPs will cease to exist and existing PEP accounts will automatically become Stocks and Shares ISAs, governed by the same set of rules. You will hold exactly the same investments as before and the tax-free status of the investment will be retained.
Do you need to do anything? The short answer is no because the institutions which manage your PEPs and ISAs will automatically introduce the necessary changes.
The long answer is perhaps. Reviewing your investments on a regular basis does no harm and if you have built up significant amounts in Cash ISAs it will be worthwhile exploring whether or not switching some of the cash to Stocks and Shares ISAs is appropriate.
If you fall into this category please let us know and we will be happy to undertake a review for you.
As the end of the tax year approaches we will be reminded that we are now in the 'ISA season'. There is no such thing as an ISA season (unless seasons last for 365 days!).
You can invest in an ISA on any day from 6th April one year to 5th April the next. Why wait until the last minute? For those who haven't yet invested in an ISA but intend to do so we will be pleased to assist and make suitable recommendations.
Changes taking effect on 6th October 2009
Those aged 50 and over can now invest higher amounts in cash ISAs and stocks and shares ISAs. For cash ISAs the limit increases from £3,600 to £5,100 per annum.
For stocks and shares ISAs the limit increases from £7,200 to £10,200 per annum. The new, higher, limits are available to all investors (regardless of age) from 6th April 2010.
If you are over age 50 and have already made cash and/or stocks and shares ISAs since 6th April 2009 you are permitted to top-up those investments to the new maximum. This would seem a sensible thing to consider doing simply because of the income and capital gains tax advantages ISA wrappers offer.
