Savings
ISA’s
ISAs are now a permanent feature of the savings landscape.
New Individual Savings Accounts (ISAs) limits came into force on 6 April 2008. People will be allowed to save up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA, within an overall annual savings limit of £7,200 over the tax year.
Notes
- Stakeholder cash and medium term products can be held in your ISA.
- Investments in ISAs are free of income tax and capital gains.
- Those aged 16-17 can invest up to £3,600 only.
- ISAs allow you to take your money out at any time without losing tax relief and furthermore you are not required to declare income and capital gains from ISA savings.
- The income tax credit is restricted to 20%. Capital gains tax deferral relief is also available.
Personal Equity Plans (PEPs)
As from 6 April 2008 PEP’s are now part of the ISA savings regime.
Savings
The 10% starting rate of Income Tax solely relates to savings income. Where an individual has savings income in excess of the starting rate limit of £ 2,440 they will be taxed at the lower rate of 20% up to the basic rate limit and at the higher rate of 40% for income above the basic rate limit.
The rates of tax for dividends are 10% for income up to the basic rate limit and 32.5% for income above the basic rate limit.