From 1 July 2014 all individual savings accounts will become New Isas (Nisas). This applies to all existing Isas and new accounts opened after 1 July. The Nisa will offer flexibility to save your Nisa allowance of £15,000 in cash, stocks and shares or any combination of the two. However, the new flexibility has raised a few questions from IC readers.
How does the maths work?
QUESTION: What does this mean if I decide to invest in an Isa between 6 April and 1 July 2014. Is the allowance pro-rated in some way - or will everybody wait until July before investing? Will I lose the extra allowance? I do not understand the mathematics/annualisation of this. Can you explain further?
ANSWER: If you invest in an Isa between 6 April 2014 and 30 June 2014, then your maximum allowance at the time of investing is £11,880. But as soon you reach 1 July 2014, your allowance for the 2014/15 tax year (6 April 2014 to 5 April 2015) rises to £15,000. So lump sum investors who have already invested £11,880 will be able to top up their investments by £3,120 between 1 July 2014 and 5 April 2015.
Regular monthly investors could put in £990 per month for April, May and June and then top up the monthly contribution to £1,336. Alternatively, you could put in £1,250 per month from the start of the tax year, to take account of the fact the New Isa (Nisa) allowance will end up £15,000 for the year (by July you will only have put in £3,750 of this).
How many providers can I have?
QUESTION: Are you still restricted to one provider when you are buying a stocks and shares Nisa, and/or one investment company, say JP Morgan?
ANSWER: You can only pay into one Cash Isa and one Stocks and Shares Isa in each tax year. However, from 1 July 2014, you will be able to transfer amounts you hold in a stocks and shares Nisa to a cash Nisa. This applies to amounts that you have paid in since 6 April 2014 as well as amounts that you have paid in during previous tax years.
As currently, you will also be able to transfer any funds from a cash Nisa to a stocks and shares Nisa if you wish.
So while the current year’s Isa is restricted to one provider, previous year’s Isa subscriptions can be transferred to a new provider. However, you should contact the new provider to arrange the transfer. Don’t withdraw sums from an Isa in order to deposit it in a new Isa. If you do, any amount that you pay in may count as a fresh payment against your annual limit.
Bed and Isa?
QUESTION: One question my Isa provider could not answer was does the bed and breakfast rule apply if I sell shares in my non Isa account and repurchase within the Isa within 30 days. I also cannot find the answer on the Inland Revenue site
ANSWER: A Bed and ISA is a way of transferring shares from either a nominee account or certificated form into an Isa.
It is not possible under HM Revenue and Custom (HMRC) rules to put shares directly into an Isa. This means that to put your shares into an Isa they must be first sold, the cash transferred into the Isa and then the shares repurchased. Many brokers and platforms have facilities set up to make the sale and repurchase at the same time to limit potential price movement.
