Are you protecting your savings from the tax man?

The ending of March indicates the approaching of three of key things: 1. Clock change, 2. Spring and Bank Holidays, and 3. Budgets and ISA investment deadlines.

The ISA – Individual Savings Account was introduced by the government to promote investing, and is the tax‐efficient way to hold investments. You don’t pay any tax on capital gains made and you don’t have to show details on your tax return. What’s more you can withdraw as much as you like from your ISA without losing the tax‐free status.

There are two types of ISA you can invest in cash and ‘stocks and shares’.  And anyone who is 18 years or over and a resident in the UK can open an ISA. The maximum amount that can be invested in an ISA for the tax year 6 April 2009 to 5 April 2010 is £7200, or £10,200 if you are over 50; which can be made up in the following:

Full amount of £7,200/£10,200 invested in Equities.

Split Cash/Equity investment – Cash ISA, up to the maximum of £3,600 or £5,100 IF you are over 50,  Equity ISA, up to the limit of the total annual amount, £7,200/£10,200.

EG1: Cash ISA £3,600/£5,100              EG2: Cash ISA £ 600

Equity ISA £3,600/£5,100                     Equity ISA £6,600 /£9,600

Total £7,200 /£10,200 Total £7,200 /£10,200

As shown above, savers can invest in two separate ISAs in any one tax year: one cash ISA and the other stocks and shares ISA. You cannot, however, invest in either two cash ISAs or two stocks and shares ISAs in the same tax year.

ISA’s are ultimately a great way to beat the tax man, as nobody likes to, or wants to pay more tax than they absolutely have too! Not only that, but it is a financially savvy way of making your savings/money work harder for you by having compound interest work for you, rather than against you. For example, if you have money saved from a previous tax year you can transfer some or all of the money from a cash ISA to a stocks and shares ISA without this affecting your annual ISA investment allowance.

The deadline for this tax year’s ISA (6 April 2009 – 5 April 2010), is fast approaching. And as the actual deadline date ends on Monday Bank Holiday, it would be a good idea to get your savings into a ISA by Friday April 2^nd 2010.

For the new tax year April 6 2010 – April 5 2011, it is important to note that the limit allowed to invest in an ISA will be £10200 irrelevant of if you are over or under 50 years of age; as it was before. The cash limit will be £5,100 rather than £3,600.

Interestingly enough, a survey carried out last month for National Savings & Investments suggested that many shy away from investing in ISAs simply because they do not really understand them and found them confusing. Whilst others admitted that the idea of putting some money into an ISA just didn’t occur to them. If this is you, then you may be interested in attending an Investment seminar on Saturday 3^rd April at 14:30—15:30, Regent Hall, 257 Oxford Street, London. Entrance – rear building. There you can have any investment questions you have answered!

With the economy the way it is, and interest rates so low, now is a good time time  to shake off any misconceived views about ISAs, both new and old, in order to make the best of the tax breaks available to you today. So do take charge of your finances and start making it work for you! To end there are a number of ISA accounts on the market to choose from, so it would be well worth your time to do a comparison as well as speak to an advisor, which you can do at the aforementioned seminar above or I can arrange for you in the comfort of your home, free of charge. Also, if 2010 is your year to get out of debt and save money, then why not arrange to have a complimentary financial game plan, where my team and will create a personalized and detailed financial plan for you and your family? It will provide you with a debt freedom date and an A to Z plan to financial freedom.

To your financial success,

Financial Educator and Internet Network Marketer

Butterly Wealth Creation

P.S. Please note that I am not a financial advisor but a financial educator! The information stated in this blog post is general information which can be found anywhere on the internet.