Over 50 ISA Wrappers
As the ISA limit increase for over 50’s approaches, you may be wondering how you can make the most of the tax efficient wrapper, particularly when the Government looks set to push taxes up in the not too distant future.
The new rules mean that if you are aged 50 or above this tax year, you will be able to invest a maximum of £10,200 into an ISA, £5,100 of which may be into a cash ISA ñ an increase of £3,000 on the previous allowance, or 42 per cent – which could according to Fidelity International, allow investors to shelter an extra £63billion from the taxman.
If you are under 50, these new rules will apply to your ISA investment from April 6 2010. However, if you are over 50 this tax year, there are a number of ways that you can make the most of your new ISA limit this tax year, depending on your circumstances.
If you have already used some of your ISA limit this tax year (up to £7,200 prior to October 6), you may be able to top-up your existing ISA investment to the full amount.
For example, if you have already invested £7,200 into a stocks & shares ISA this year, you will be able to top-up to the new limit of £10,200 after October 6. However, you will have to top-up with the same provider and into the same product as before if it is available. If the product is no longer available or the deadline has passed, you should be able to invest in the latest edition of that product.
Cash Vs Stocks & Shares ISA’s
You are allowed to invest in both one cash and one stocks & shares ISA per tax year. If, for example you have already invested the previous cash ISA allowance of £3,600 into a cash ISA, you should be allowed to top-up the same ISA product with the additional £1,500 to make the most of the new cash ISA allowance of £5,100.
However, it is important to note that not all ISA providers will allow you to top-up your existing cash ISA, so be sure to check with your provider.
If you have invested some or all of your cash ISA allowance you will be able to invest the remaining balance into a stocks & shares ISA, and again, you should be able to top-up your existing investment.
Investment In An ISA
However, if you are over 50 this tax year and have yet to invest into an ISA, you can invest the full £10,200 into an ISA product of your choice after October 6.
This can be done by investing up to £5,100 into a cash ISA and the balance into a stocks & shares ISA, or the full £10,200 can be invested into a stocks & shares ISA.
When it comes to stocks & shares ISAs, there are number of product types to choose from, including structured products, equity income funds and corporate bond funds.
The product you choose will depend on your individual situation, if you want a fixed rate you may choose cash or for those ready to assume some level of investment risk, a structured product. While if you prefer the potential for higher returns and are not adverse to risk you may be more interested in a fund that allows ISA investments.
Transfer Your ISA
Finally, if you have already invested your ISA allowance but are unhappy with the product you chose, you may be able to transfer your ISA balance into a product that you think best suits your needs.
However, it is important to bear in mind that you may transfer an existing cash ISA into a stocks & shares ISA, but you may not transfer a stocks & shares ISA into a cash ISA.
If you are over 50 and transfer before investing the full £10,200, you may then top-up your investment providing that the product is still open.
Compare ISA’s and Savings Accounts.