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Individual Savings Accounts (ISA's)


New UKFSO。CO。UK Tax Guide: Grow Rich with a Property ISA


This completely independent guide shows you how by investing in a property ISA you could make huge tax savings and earn 50% more income than through other forms of property investment. ISAs allow you much more control over your money than other savings vehicles, as well as being very effective tax shelters.


Investing in a property ISA means you can:

* Permanently eliminate your income tax and capital gains tax bills.
* Obtain tax-free access to your money at any time.
* Include large, top-quality properties in your portfolio.
* Side-step the costs, risks and hassles of being a landlord.

Click here for more information


The rules on what can be invested in an ISA are complex. The maximum which can be invested in any tax year in equities under a 'maxi' ISA is £7,000. Once you have invested up to your limit and you subsequently withdraw money you cannot simply put it back later in the year.

In the March 2005 Budget , Gordon Brown backed down from plans to lower the limit to what can be invested in a tax-free ISA each year. The £7,500 limit will now continue untouched until 2010.

April 5th, 2006 marks the end of the tax year. By this date you should have decided whether you will be making any payment into an Individual Savings Account for the 2005/2006 tax year.

You are allowed to invest up to £7,000 into an ISA, either into a:

‘Maxi' ISA, in which you can place up to £7,000 in equities, or a mixture which includes up to £3,000 in cash and £1,000 into an insurance-style product, or a
   
‘Mini' ISA, which allows you to invest in separate ISAs from different providers. Here, the limit is £3,000 for cash, £1,000 into an insurance product and £3,000 in a share-based one. However, these limits are not portable. If you don't invest up to your full limit, you lose that part of the allowance. Use it or lose it by April 6th!

Up till April 2004, capital growth and income from equity investments held in an ISA were free of tax and any benefits from approved life insurance policies could also accrue tax-free. Now the tax credit on dividends within equity ISAs has been scrapped. You don't have more income tax to pay, but your fund manager will not be able to reclaim the credit of 10%.

This is affecting fund returns to the tune of around £150m a year. Effectively this means that annual dividends on a typical equity income fund are now more than 0.3% lower.

Most experts nevertheless think it is still worth holding ISAs. All assets held within an ISA will remain exempt from CGT ( Capital Gains Tax ). So not only is there no need to inform the Revenue when you sell your holdings, you can trade freely within the ISA without worrying about CGT liabilities. You don't have to declare an ISA on your tax return.

For higher rate taxpayers, the dividend tax benefits are also definitely worth having. Higher rate taxpayers effectively save 22.5% in income tax on dividends paid within an ISA. And if ISA assets are held within corporate bonds, all income is tax-free.

We like the look of the new stocks and shares ISA from Halifax, which allows you to invest in the UK FTSE 100 Index Tracking Fund .

Legal & General also run a low-cost ISA which aims to track over 650 companies that make up the FTSE All-Share Index, allowing you to benefit from the growth potential of the UK stock market. You can choose to invest from just £50 a month, or with a lump sum from £500..



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