Why are ISA's being recommended

Careful_with_that_Axe

I was left a legacy by my Mother which I have invested for income as I am disabled and unable to work. I am happy with the income investment, but my FA keeps pushing mini ISA's and Stocks and Shares ISA'a at me. As I am not an income tax payer, I am unsure whether these are the best home for some of the money. Is she just offering standard advice and not looking at my specific circumstances? I would be grateful for any views please.

Many thanks

noh

ISAs offer many advantages here is a link to a previous thread.
http://forums.moneysavingexpert.com/showthread.html?p=296333

Nigel

Jonbvn

Depends on the amount of the legacy left by your mother. If it is a significant amount then you could be liable for tax on any interest and/or CGT on any capital gains.

Remember that ISA's are just a wrapper. Even as a non tax-payer you do not lose anything by using them

Heinz

I expect the reasoning is that you're only 'not a taxpayer' until your income exceeds your personal tax allowance. If the interest from the investment of the legacy plus your other income takes you over your personal tax allowance, you start having to pay tax.

The £3k in a mini cash ISA each year (£3,600 in the 2008/9 year IIRC) remains tax free regardless of that - so are a good idea for everyone. I expect similar can be said about stocks and shares ISAs (although I think the rules about them are changing in April).

dunstonh

ISAs are top of the queue every time (actually there are exceptions but i will ignore those).

Unit trusts generate income and in some cases interest. Outside of an ISA, this would be added to your income. This could take you into basic rate or have an impact on some benefits.

There is absolutely no cost difference between unit trusts inside an ISA and unit trusts unwrapped. Indeed, in some cases fund houses run discounts or offers only on the ISA wrapper which can make them cheaper in the ISA.

The other thing is that if you hold on to the investments long term, you could end up finding the growth takes you above your capital gains tax allowance. Inside the ISA they are exempt from this.

You should be asking these questions to your adviser. Hopefully, she is an IFA and not a tied agent (if she is a tied agent then go find an IFA and get real advice). You need to trust your adviser and the adviser needs to know you are comfortable with the advice. Good communication is the key to giving and receiving good advice.

bristolleedsfan

dunstonh wrote: »

You should be asking these questions to your adviser..

i thought these questions should be asked in ISA sub board. :rotfl:

Careful_with_that_Axe

Total investments including existing ISAs, premium bonds, bonds etc approx £75k. Have a good spread of investments, but unlikely that income will go above tax free level this/next tax year. Benefits are not means tested and only receive DLA and IB. FA is independent but maybe I should be thinking about going to someone else as I find communicating with her rather difficult (may of course be my fault!). Many thanks for all the advice. Sorry if original question should have been posted elsewhere - slip of thefinger!

Jake'sGran

Heinz wrote: »

I expect the reasoning is that you're only 'not a taxpayer' until your income exceeds your personal tax allowance. If the interest from the investment of the legacy plus your other income takes you over your personal tax allowance, you start having to pay tax.

The £3k in a mini cash ISA each year (£3,600 in the 2008/9 year IIRC) remains tax free regardless of that - so are a good idea for everyone. I expect similar can be said about stocks and shares ISAs (although I think the rules about them are changing in April).

I am a non tax payer but I do use my ISA allowance each year although not always the full amount in equities. Before that I always used PEPS. If I hadn't used these tax efficient methods of saving I believe I would have had to pay CGT on some of my investments which have done rather well and possibly Income Tax too on the additional interest if the money had been in savings accounts. This has only worked by avoiding the initial charge on funds by buying through a discount broker.