Guide to what is an ISA? An ISA is an Individual Savings Account. They were launched in 1999 and are a tax efficent investment. They are open to anyone over 18 or over 16 for a cash isa. The government changed the system in April 2012 and you are allowed to invest upto £11,280 between cash and stocks/shares ISA's. You are allowed 1 Cash ISA upto a maximum value of £5,640 each tax year with the option of investing the rest in a stocks and shares ISA. or you could invest up to the entire £11,280 in a stocks and shares ISA. If you remove any funds from an ISA account in a tax year e.g pay £5,100 into a cash ISA then remove £1000 from it you are not allowed to replace the funds removed in the ISA account so think carefully before cashing in as the tax savings on the amount removed will be lost forever. Advantages There is no personal income tax (income or capital gains) on any ISA investment. Normally a basic rate taxpayer has to pay 20% of any interest earned in tax and a higher rate tax payer 40% but in an ISA the tax payable is zero. No requirement to include in tax returns You are not taxed on the funds you remove from an ISA account. When can i invest in an ISA? Each tax year you get a new ISA allowance 6th April until 5th April. If you do not use your ISA allowance in any one year you have lost the allowance for that tax year forever.

From this tax year 2012/2013 you are now allowed to transfer previous cash isa's into a stocks and shares isa. You are still not allowed though to transfer a stocks and shares isa into a cash isa.   TRANSFERRING ISAs If you find that your existing cash ISA rate drops you can transfer it to another provider if you see a better rate and they accept transfers in. You advise them you would like to transfer it to them and if they accept transfers in they will help with the paperwork. (please read below as this transfer MUST be done by the managers) YOU MUST NOT CLOSE YOUR CURRENT ISA AND WITHDRAW THE MONEY AND THEN OPEN ACCOUNT AS THIS WOULD COUNT AS A NEW SUBSCRIPTION AND YOU WOULD LOSE THE TAX WRAPPER ON THE FUNDS WITHDRAWN.

ISA BEST BUYS - MAY 2012

Cheshire Building Society 3.50% (instant access) rate includes Fixed 2.50% bonus until 31/10/13. Santander 3.30% (instant access) rate includes 2.80% bonus for 1st 12 months.   Halifax 4.50% (5 year fixed rate ISA) Virgin Money 3.30% (3 year fixed rate ISA)

The Types (An Isa can contain 2 components) Cash ISA  (Component 1) This is as the name suggests a basic savings account which is available from most banks and building societies. Stocks and Shares ISA (Component 2) These split into 2 types Self select ISA. with these you use a wrapper from a stockbroker like Barclays, Halifax etc and buy the shares you want through them. Fund ISA with these your funds are invested by a fund manager who will pick where your funds are invested.

WHAT TO DO IF YOU EXPERIENCE PROBLEMS TRANSFERRING YOUR ISA

How long will it take to transfer my ISA? The industry anticipates that the new Guidelines will mean that normally the whole process will be completed within 23 working days. However, there are some instances which may make the process take longer. Some ISA Managers offer ISA products (usually stocks & shares ISAs) that give a 'cooling-off' period. In these instances, thetransfer process cannot be started until the cooling off period has expired. Also, some ISA Managers may impose their own restriction on transfers so it is important that the ISA investor takes account of the individual account terms and conditions applicable to their existing ISA. If  the ISA being transferred has a notice period, it will be necessary for the newISA Manager to ensure they are aware of the investor’s wishes with regards to serving the notice period or allowing the application of the penalty. Will I be compensated for the delay in transferring my ISA? If an investor feels they have been unduly disadvantaged by any delays in the  transfer of the CashISA between providers they should follow the complaints procedure of the provider who has caused the delay. Complaints referred to the Financial Ombudsman Service will be dealt with on an individual basis and be based on their own merits and disadvantage proven. I am dissatisfied about the time taken to transfer myISA, what can I do? If, after checking with one or both providers, the ISA investor is still unhappy with the progress of their transfer, the investor should formally complain to the offending ISA Manager and follow the Manager’s instructions with regards escalating their complaint to the Financial Ombudsman Service. If you're not satisfied with the response offered, get in touch with the Financial Ombudsman Servicew by visiting the website or by calling 0845 080 1800. The Ombudsman should be able to offer advice about your next course of action, but banks and building societies have up to eight weeks to respond before they can take their case to the Financial Ombudsman.

What is the CAT standards for individual savings accounts?

These are a set of voluntary standards set by the UK government in 1999 and these relate to costs, access and terms (hence CAT standard). if an individual savings account meets the standard it can say it is CAT approved. The presence or lack of a CAT standard does not predict whether the ISA will be a good or bad investment. What the CAT standard does not mean is. The government guarantees it That the individual savings account is suitable for you That if you invest in a stocks and sgares ISA that the value won't fall That the government recommends it

WHAT IS A TESSA Tax-Exempt Special Savings Account (TESSA) was launched by John Major in his first budget in 1990. Tessas were replaced in 1999 by Individual Savings Accounts (ISA's).