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ISA and PEP Changes - The Latest News

Individual Savings Accounts (ISAs) are the Government's primary vehicle for tax-advantaged savings outside of pensions. HM Treasury have announced a package of reforms which are designed to make the regime simpler and more flexible for savers. These reforms will become effective from 6 April 2008.

We understand that there will be a lot of new information to digest so we've put together a summary of the key changes and what they might mean for you.

Increases to subscription limits

From 6 April 2008 you will be able to subscribe more to your ISA and so increase your tax efficient savings. The overall subscription limit will rise to £7,200, of which up to £3,600 can be saved in cash with one provider. The remainder can be invested in a stocks and shares ISA with the same or a different provider.

Alliance Trust Savings offer both stocks and shares and cash ISAs.

Bringing PEPs within the ISA wrapper

PEPs will cease to exist from 6 April, so from this date all PEP accounts will automatically become stocks and shares ISAs and will be subject to ISA rules. You will be now able to invest your full annual ISA allowance in this re-labelled PEP as long as you haven't subscribed to another stocks and shares ISA during the same tax year.

Removing the mini/maxi distinction

The mini and maxi distinction which is a feature of the current system will be removed. This means that you will have a stocks and shares ISA and/or a cash ISA. You can subscribe to either or both types within the same tax year provided you remain within the overall contribution limits.

Transferring a cash ISA to a stocks and shares ISA

Savers will be allowed to transfer from a cash ISA to a stocks and shares ISA, but not the other way around. This is means you can diversify your assets and benefit from potentially higher returns offered by stocks and shares over the medium to long term. Alliance Trust Savings will accept transfers from cash ISAs held either with us or with other ISA managers.

Make the most of your tax efficient savings

Remember with an ISA you don't have to pay any Capital Gains Tax on your investments or pay any additional tax on income, and you don't have to mention it on your tax return. An ISA from Alliance Trust Savings offers you a wide investment choice, no set up or annual charges and excellent customer service. What's more, our online dealing service provides you with immediate access to the markets, up to date valuations and free research tools.

So why not prepare for the changes now and transfer any PEPs or ISAs you have with other managers to us? We will look after all the paperwork for you while you enjoy all the benefits an Alliance Trust ISA has to offer. Just call us on 01382 573737 to request a transfer form or click here and download one yourself.

* Please note the levels and bases of taxation can change and the value of any tax advantages will depend on your individual circumstances