Essex investors need to recognise that you can contribute up to £15,240 to an Individual Savings Account (ISA) in the 2016/17 tax year. Cash that you withdraw from a flexible ISA can be replaced during the same tax year without counting towards your annual ISA allowance. What sets ISAs apart from other savings and investment accounts is that any interest on cash savings, gains from investments or income from dividends are tax-efficient, although tax efficiency may now be achievable for some outside an ISA if the income or gains are covered by a dividend allowance, personal savings allowance and Capital Gains Tax (CGT) allowance. In addition, you do not have to declare any ISAs that you have on your tax return.
On this basis, in view of their tax benefits, Essex investors also need to be aware that ISAs can help your savings and investments grow faster over time. Moreover, investing your ISA in stocks and shares has the added advantage of helping safeguard you from a potential CGT bill in the future. CGT is a tax on the gain you make when you sell or dispose of assets such as investments. It is currently charged at 20% for higher-rate taxpayers on gains made that exceed the yearly tax-free allowance which is currently £11,100.
Rules on ISA death benefits introduced in April 2015 allow for the transfer of an extra ISA allowance to the deceased’s spouse if they passed away on or after 3 December 2014. If applicable, Essex investors also need to be aware that the surviving spouse can use an additional one-off allowance, which is equal to the value of their partner’s ISA savings, as well as enjoying their own usual yearly allowance. An additional permitted subscription (APS) can be used in certain situations.
Essex investors also need to be aware that you will qualify for the additional allowance whether or not you inherit the actual assets of the ISA. The deceased’s ISA assets are distributed according to the terms of the will or intestacy rules and any Inheritance Tax liability will remain in the usual way (except for ISAs qualifying for Business Property Relief). No actual funds are transferred and the extra allowance can be made up from your own assets. Also, as well as being married or in a registered civil partnership with the ISA holder, you need to have been living together – if you were separated, either under a court order, Deed of Separation or any other situation that was likely to become permanent, you cannot use the additional allowance.
Long-term investors who can afford to invest at the start of the tax year rather than at the last minute not only gain a year’s performance, but these extra gains will be reinvested in the market until they need the money. Over time,
the effect of compounding can be significant. Essex investors also need to be aware that the more you invest, the greater the potential impact of early investing. Likewise, the longer you are investing for, the larger the compounding effect. Also, investing early in the tax year to benefit from compounding is most pertinent not only for those saving for retirement but also for parents investing for their children’s future through dedicated Junior ISAs (JISAs).
For more information for Essex investors as a means of protecting both yours and your family’s best interests so as to then give you added peace of mind, please contact our dedicated Essex-based staff at Andrew Douglas Wills and Legal Services now via www.andrewdouglaswills.co.uk or on:
01376 348 997
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