Few questions about ISA...

ohit

I realise now that it is good to have an ISA and simply build it up every year. I'm not currently a tax payer and probably won't be for another 3 years at least.

From a brief search online it appears the Abbey Postal ISA is currently highest for cash at 5.1%

What about a Maxi ISA though? My thinking is that I could stick £3k into cash as normal, and use some (if not all) of the £3k stocks allowance for some shares/funds/etc.

How would this work? Getting a cash ISA seems easy enough, but the stocks/shares part, where do I go? Do I need to look for bank that offers this maxi combination specifically? or what? Huh

Any advice would be appricated.

paul666

ISA's are tax devices. If you're never going to be paying tax then you need to ignore if an account or investment is 'ISAable' or not and just look for the APR.
You can get share/fund isas from all sorts of places - go to the https://www.fool.co.uk and read up on the FAQs.

ohit

Thanks for your reply.

I will be paying tax in about 3 years or so. Therefore, if I start with ISA now with £3k every year into each cash and stocks, by the time I'll be paying tax I'll have £9k in cash and £9k in stocks (assuming the value of these don't fall).

Have I got that bit correct?

TheDink

But if you are going to be paying tax in the future, you're best off going for an ISA now. That way you lock as much money away from the tax man as possible (before they get rid of ISAs).

MAXI ISA would depend on your attitude to risk - generally the rates paid on cash elements within a maxi ISA are not worth having. The providers encourage you to put as much of the investment as possible into stocks & shares - you could get a much higher return than 5.1%, you could get lower.

Alternatively you can have a cash mini ISA (Abbey is the highest payer at the moment) plus a stocks & shares ISA, plus an insurance ISA. Many of the providers of stocks & shares ISAs offer both mini and maxi varieties. If you're interested, it might be worth going to a fund supermarket (such as Hargeaves Lansdown) who provide the ISA wrapper and let you choose funds from multiple fund managers. I've no idea about which is the best wrapper, or which are the best funds to choose though!

Leia_Stephens

Do we have any idea of when ISAs might finish ???

TheDink

ISAs started in 1999 and the Inland revenue states that they will be around for at least 10 years - their tax free status may then change (some tax benefits on stocks and shares ISAs have already been reduced). From the 2006/7 tax year the total amount you can invest each year will be reduced from £7000 to £5000 (I think this may involve a drop from £3000 to £1000 for mini cash ISAs).

Full info is available on the Inland Revenue website: http://www.inlandrevenue.gov.uk/pdfs/ir2008.htm

isasmurf

What about a Maxi ISA though? My thinking is that I could stick £3k into cash as normal, and use some (if not all) of the £3k stocks allowance for some shares/funds/etc.

If you only intend to stick £3k into Stocks and Shares do not go for a Maxi ISA.  You can have a Mini Stocks & Shares investing in £3,000 and a Mini Cash investing £3,000 per year.  These can be with two different providers.

However, if you went for a Maxi ISA you would have to invest both the Stocks and Shares and the Cash with the same provider.  Maxi ISAs are only beneficial for those wanting to invest more than £3,000 in Stocks and Shares.  

Do we have any idea of when ISAs might finish ???

As SL has already said ISAs are guaranteed to be around in their current form until 5th April 2009.  When ISAs were launched the Chancellor committed himself to a review of ISAs by 2006.  

From 2006/07 the ISA limit is due go back to it's originally intended limit of £5,000, with a maximum of £1,000 cash.  I say originally intended because the current limits were only meant to be introduction limits for the first year of ISAs, to get them off the ground.  But the Government seems to have shot themselves in the foot by continually extending this introduction limit, and now everybody sees the changes as a reduction.  However, I don't believe the limits will fall for a number of reasons - the main one being there's probably a General Election next year and they wouldn't want to do anything unpopular just before an election now would they (cynical, moi? :P )

Leia_Stephens

Thank you, SL and saver smurf .

Yes, hopefully the ISA limits will be reviewed again and become £7k and £3k, as they are now.

Leia

ohit

Excellent!

Thanks you guys for the information. The seperate providers bit for each type (cash and stocks) is exactly what I'm after.

I'm going to apply for the Abbey Postal ISA now. Then maybe look at Egg fund manager centre first for the stocks ISA (I have the savings there so it's all ready basically).

Thanks all again.