Investment and risk

NISAs are not investments themselves but flexible, tax-efficient savings wrappers within which a wide range of savings and investment products can be held virtually tax-free. There are many NISA providers offering tax-efficient savings through a wide range o...

Shortened demo course. See details at foot of page.

Since 1 July 2014 the annual subscription limit was increased to £15,000, all of which may be invested in cash.

Any subscriptions made since 6 April 2014 will count against the £15,000 subscription limit for 2014/15.

Tax treatment of the investor

Interest, dividends and property income distributions from NISA investments are exempt from any additional income tax

All interest earned within a cash NISA is credited gross

Withdra...

Shortened demo course. See details at foot of page.

Where a NISA holds life assurance, the policy must end if the subscription is invalid. The policy may give rise to a taxable gain if the proceeds are greater than the premiums paid;

The NISA manager will repay any tax due to HMRC at the basic rate, but the investor must report the gain to their tax office and may have to pay more tax if they are a higher rate taxpayer.

All UCITS are qualifying investments for NISAs

Not all UCITS can be held within a stocks and shares NISA

Shares that are officially listed on a recognised stock exchange anywhere in the world

Corporate bonds that...

Shortened demo course. See details at foot of page.

Cash may be held in a stocks and shares NISA (and is no longer taxed at 20% since July 2014).

Shortened demo course. See details at foot of page.

Managers must make available information about their policies on smoothing and charging

The whole of the with-profits fund and the whole of the smoothing account, apart from specific deductions allowed by law, are for the benefit of the policyholders.

Unit trust and OEIC NISA s - these are the most popular NISAs. They provide a broad spread of holdings for relatively small investments. NISAs may be linked to one or more funds and many managers offer an extensive choice of funds. Corporate bond NISAs based on unit trusts and OEICs, have also proved to be very popular. In particular high yield bond funds, investing in sub-investment grade bonds, have attracted many income seekers. The NISA’s tax structure favours the holding of bonds, as the account manager can receive the interest without any tax being deducted. NISAs may also be invested in any UCITS scheme recognised by the FCA;

Investment trust NISA s - investment trust NISAs are similar to their unit trust and OEIC counterparts, but usually carry explicit additional charges to ...

Shortened demo course. See details at foot of page.

Commission – the purchase and sale of investment trusts and shares will usually involve stockbroking commission. This may be a flat rate charge, at the full rate or may be at a specially discounted bulk rate or 0.2% to 0.5%;

Dividend collection fee – self select NISA managers may charge a fee for each dividend collected rather than an annual charge. This is VAT free and usually between £4 and £7.50 which favours larger shareholdings;

Report fees – self select NISAs will often levy a substantial fee, e.g. £50 plus VAT, for investors who wish to receive annual reports to attend shareholder meetings. The size of the fee is designed to be a deterrent as in practice annual reports are easily available from other sources.

If an investor wishes to transfer the current year’s NISA subscription, all of the current year’s subscription must be transferred in its entirety

Where an investor has made subscriptions in previou...

Shortened demo course. See details at foot of page.

Termination

There are no tax charges on the termination of a NISA, however as the NISA is exempt from CGT any capital losses are not allowable against other gains. If there are any charges on termination these are likely to be the same as those chargeable on transfer.

When a NISA holder dies, the NISA is automatically terminated and the value of the underlying assets reverts to being taxable and will form a part of the investors’ estate for IHT purposes.

The start date for the new Junior ISA was 1 November 2011 and the key features are below.

Eligibility

All UK resident children (aged under 18) who do not have a CTF are eligible.

This includes children who were born before the start of CTF eligibility. Childr...

Shortened demo course. See details at foot of page.

Maturity

At the age of 18, the Junior ISA by default becomes a normal adult NISA. The funds are then accessible to the child. Having a Junior ISA will not affect an individual’s entitlement to adult NISAs. It is possible for Junior ISA account holders to open adult cash NISAs from the age of 16 and Junior ISA contributions do not impact upon adult NISA subscription limits.