Investment FAQs - ISAs
What is an ISA?
ISA stands for Individual Savings Account, the government’s tax-efficient savings initiative. The special tax-efficient features of these accounts mean that there are strict limits on how much you can invest in a given tax year which runs from 6 April until 5 April.
The favourable tax treatment of ISAs may change in the future; however, the limits for the current tax year, 2008/09, are detailed in the How much can I invest in the ISA? FAQ
For the tax year 2008/2009 there are two types of ISA, a Cash ISA and a Stocks and Shares ISA. The annual ISA allowance is £7,200 which can be split between the two types of ISA:
- Cash ISA
You can invest up to £3,600 in a Cash ISA with one provider. By opening a Cash ISA you will be limiting the amount of tax-free savings you can make in a Stocks and Shares ISA. - Stocks and Shares ISA
You can invest the remainder of your £7,200 allowance in a Stocks and Shares ISA with either the same, or another provider. Stocks and Shares ISAs are available through our Financial Consultants. By opening a Stocks and Shares ISA you will be limiting the amount of tax-free savings you can make in a Cash ISA.
What are the benefits of ISAs?
An ISA is designed to offer special tax advantages. They are a flexible way to earn a tax efficient return, allowing you to invest in cash, stocks and shares either together or with different product providers. You do not have to leave your capital untouched for a specified period in order to qualify for tax efficient interest. Stocks and Shares, which carry a level of risk due to stock market fluctuation, are not available directly from the Cheshire but in conjunction with our partners Norwich Union. The interest rate paid on ISAs will vary according to Bank of England base rates.
What tax advantages are there?
All income and gains from ISA investments are exempt from UK personal income tax and capital gains tax in the hands of the investor. Interest on cash ISAs is payable without deduction of income tax at source. If you choose to invest in a Stocks and Shares ISA, the 10% tax credit attached to UK dividends can no longer be reclaimed on your behalf by the ISA manager.
Information about ISAs does not have to be declared on your tax return. The favourable tax treatment for ISAs may not be maintained.
What are the tax advantages worth?
Liable to basic rate income tax, interest is not subject to the 20% deduction which would otherwise be made on the interest paid. Higher rate taxpayers will save a further 20% of each interest payment.
How much can I invest in the ISA?
The limit for a Cash ISA is £3,600 each tax year.
Do I qualify for an ISA?
Joint ISAs are not permitted. ISA investments are, and must remain, in the beneficial ownership of the investor and must not be used as security for a loan. Anyone aged 16 years or over can open a Cash ISA as long as they are ordinarily resident in the UK.
How do withdrawals affect the investment limits?
You are restricted to an annual subscription limit of £3,600 which cannot be exceeded.
For example, if you invest £3,600 in a Cash ISA on 1 May 2008 and withdraw £2,000 on 3 June 2008 you cannot make any further deposits to that Cash ISA in 2008-2009 because the annual investment limit has already been reached.
How can deposits be made?
Cheshire ISA deposits can be made by cash, cheque, standing order or by telegraphic transfers.
What about transferring existing tax-free savings into a Cheshire ISA?
If you wish to transfer an existing ISA balance to the Cheshire, you need to be aware that although we will not charge for this, your existing provider may. There may be other taxes and costs that are not paid through the Society. In addition, Cash ISAs held with the Cheshire can be transferred to another provider at any time subject to the terms and conditions of the account.
Withdrawals, closures and transfers
- Cash ISA 3rd Issue
If the provisions of the ISA regulations are not met, your ISA will become void. If your ISA does become void, we will notify you of the fact as soon as we become aware of it.Withdrawals from the Instant Access Cash ISA 3rd Issue are allowed at any time. If you decide that the Instant Access Cash ISA 3rd Issue does not suit your needs you can cancel the account within 14 days of the opening date without penalty. In these instances you will be entitled to subscribe your full allowance to another ISA during the current tax year, either with the Cheshire or another provider.
The Instant Access Cash ISA 3rd Issue can be closed at any other time without notice, penalty or loss of tax exemption.
Alternatively, you can transfer your Instant Access Cash ISA 3rd Issue to another ISA provider at any time without penalty.
We’ll help you to transfer to a different type of account or give you your money back with interest. All you need to do is contact your local branch or our Customer Contact Centre.
To stay within the ISA regulations, if you cancel a Cash ISA within a tax year then you cannot open another Cash ISA until the next tax year.
The interest you receive will depend upon the number of days you invested and whether it was a cash or cheque investment. For cheque investments, the funds cannot be withdrawn until the cheque has cleared. Withdrawals of up to £500 in cash per account, per day can be made and larger amounts are available by cheque. For cash withdrawals between £500 and £2,000, two working days advance notice is required. Please contact your local branch or our Customer Contact Centre to arrange. You may be required to prove your identity on collection of the funds. An upper limit on withdrawals may apply subject to the Society’s discretion.
- Fixed Rate Cash ISA:
If the provisions of the ISA regulations are not met, your ISA will become void. If your ISA does become void, we will notify you of the fact as soon as we become aware of it.No withdrawals are allowed from the 12 Month Fixed Rate Cash ISA throughout the term of the investment. If you decide that the Fixed Rate Cash ISA does not suit your needs you can cancel the account within 14 days of the opening date without penalty. In these instances you will be entitled to subscribe your full allowance to another ISA during the current tax year, either with the Cheshire or another provider.
The Fixed Rate Cash ISA cannot be closed until the account has been open for 60 days. Alternatively, you can also transfer your Fixed Rate Cash ISA to another provider once it has been opened for 60 days, subject to 60 days loss of interest at the fixed rate.
We’ll help you to transfer to a different type of account or give you your money back with interest. All you need to do is contact your local branch or our Customer Contact Centre.
To stay within the ISA regulations, if you cancel a Cash ISA within a tax year then you cannot open another Cash ISA until the next tax year. The interest you receive will depend upon the number of days you invested and whether it was a cash or cheque investment. For cheque
investments, the funds cannot be withdrawn until the cheque has cleared. Withdrawals of up to £500 in cash per account, per day can be made and larger amounts are available by cheque. For cash withdrawals between £500 and £2,000, two working days advance
notice is required. Please contact your local branch or our Customer Contact Centre to arrange. You may be required to prove your identity on collection of the funds. An upper limit on withdrawals may apply subject to the Society’s discretion.
What are Deposit based Stakeholder Standards?
A set of standards have been laid down by HM Treasury for deposit-based stakeholder products where the minimum initial investment must be less than £10, the interest rate is specifically linked to the Bank of England base rate and access to your savings must be instant. Our Cash ISA 3rd Issue currently meets these standards, but our 12 Month Fixed Rate Cash ISA does not.
What happens to personal equity plans (PEPs)?
All Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs from April 06th.
What happens to TOISAs?
All TOISA’s will automatically become Cash ISAs from April 06th.
Do I have to complete a new application every year?
No, unless there is a break between investments to a particular ISA which lasts for a whole tax year. If this is the case you must make a fresh application before investments to the same ISA may re-commence.
What if I subscribe to too many ISAs?
If by mistake in the same tax year you subscribe to
- to more than one Stocks and Shares ISA
- to more than one Cash ISA
You should contact the HM Revenue & Customs ISA Helpline on 0845 604 1701 for advice as soon as possible (your call will be charged at local rates).
Can I transfer funds from a Cash ISA to a Stocks and Shares ISA?
Yes. Savers will be able to transfer money saved in their cash ISA to their stocks and shares ISA.
