Money Matters: Beat the taxman

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Amazingly, with snow still on the ground in parts of the country, the new tax year is once again with us.

We have new personal tax allowances, new pension rates and new Individual Savings Account (ISA) allowances.

Tax efficient products, in their many guises, have played a big part in savings and investment strategies for a long time now – from TESSAs, TOISAs and PEPs to the more familiar cash and investment ISAs of today.

l What is the new allowance?

From April 6, 2013, the total ISA allowance has been raised to £11,520 per person.

Of this up to £5,760 can be invested in a cash ISA, the balance in an investment ISA.

Alternatively, up to £11,520 can be invested solely into the investment component.

These can typically be paid as a lump sum or monthly by direct debit.

l Can a contribution be made to more than one ISA in a tax year?

Contributions can be made into two ISAs in the same tax year provided that one is a cash ISA and the other is an investment ISA.

It is not possible to make contributions to two ISAs of the same component in the same tax year.

However, where the current year’s subscriptions have been transferred to a new ISA manager, it is possible to continue contributions to the new ISA.

l Who can have one?

To take out an ISA an investor must be resident and ordinarily resident in the UK for tax purposes.

Crown employees working overseas, such as diplomats and the armed forces, and their spouses who are non-UK resident may still contribute to an ISA.

An investor must be aged 18 or over to invest in an investment ISA and 16 or over to invest in cash ISA.

It is possible for UK resident and ordinarily resident minor children, who do not have a Child Trust Fund, to take out a Junior ISA.

l Can existing ISA holdings be transferred between components?

Since April 6, 2008, it has been possible to transfer from a cash ISA into investment ISAs.

It is still not possible to transfer from an investment ISA to a cash ISA.

Former PEPs have been reclassified as investment ISAs and can be transferred to another investment ISA.