Stocks & Shares ISA's

Sometimes referred to as Equity ISA's, these replaced PEPs in 1999, and allow you to invest in areas such as Unit Trusts or OEIC’s in a more tax efficient way. ISA’s offer investors tax benefits, and are generally considered to be a medium to longer-term savings plan.

Since the Government is keen to encourage people to save, ISA’s are free of Capital Gains Tax and income tax liability, but there is limit to how much you can invest. Currently, you can invest up to £7,200 per tax year into a Stocks & Shares ISA. For a married couple, this allowance means that you could invest up to £14,400 annually in a tax-efficient way. These allowances are annual, meaning that you can’t go back to missed years.

ISA’s can be invested in by way of one-off lump sums, multiple lump sums or smaller regular payments. If you choose to invest in ISA’s by making regular payments, you have the potential to benefit from ‘pound-cost averaging’. In short, this helps to smooth out some of the ups and downs of the stock market, by purchasing more shares in stocks when the prices are low, and less when the prices are high.

ISA’s fall into 2 basic categories - Cash ISA’s and Stocks & Shares ISA’s

Cash ISA

• Offered by a single provider.
• You can invest up to £3,600 in cash, though this reduces the amount you can invest in a Stocks and Shares ISA in the same tax year

Stocks & Shares ISA

• You can invest up to £7,200 in the stocks and shares ISA, less any investment in a Cash ISA in the same tax year.

As ISA’s can involve investment, you need to bear in mind that this will also introduce an element of risk. If in doubt, get specialist advice.

For further information on ISA’s, our savings section will help you get started.

Legal & General’s Financial Advisers, who are based in local Bradford & Bingley branches, are able to offer you investments through a large number of specially selected funds, giving you access to some of the best performing funds on the market.