The government wants us to save, this is why they offer us incentives. However, there really aren't that many tax giveaways that are widely available to everyone. The Individual Savings account represents one of the best available tax breaks to all UK residents. This savings vehicle started life in 1997 and was brought in by the then chancellor of the exchequer, Nigel Lawson. The Personal Equity Plan (PEP) had a tax free limit of £6,000 with no more than 25% being invested in overseas equities. Back then you could also take out a single company PEP for £3,000 in a company such as BT, Shell, Rolls Royce etc.
Since its humble beginnings, it has now grown into a tax free allowance of £20,000 which can be invested in stocks and shares, cash or any combination of the two. This allows you to build up, over time, a considerable sized portfolio. And, even if you are saving just £25 per month, this could also turn into a large savings pot which will be completely free of any capital gains tax!
Investors can now pass on their Individual Savings Accounts (ISAs) to their spouse when they die and keep their tax free status.
Previous rules had removed the tax-exempt status of ISAs on the saver's death, meaning their widow would have to start paying tax on the total amount held within the ISA wrapper. We believe this is a welcome and long overdue change which has previously been the cause of much frustration at what would be a difficult time.
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Elson Associates does not offer advice as to the suitability of investments. If you are unsure whether an investment is suitable for you, you should obtain expert advice. Past performance of an investment is not necessarily a guide to its performance in the future. The value of investments or income from them may go down as well as up. You may not necessarily get back the amount you invested.
Please remember that tax advantages of ISAs may be subject to future statutory change. Eligibility to invest in an ISA and the value of tax savings will depend on individual circumstances.
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