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You don't have too much time left to
make up your mind before the 5 April 2005 deadline about how to fully
utilise your individual savings account (ISA) allowance before the end
of the 2004/05 tax year.
At this
time of the year we are asked many
questions relating to this subject, so to assist you if you are
considering increasing your ISA exposure or are looking to purchase your
first ISA, we have provided answers to some of the most commonly asked
questions.
Q:
What is the difference between a Maxi and a Mini ISA?
A:
Each tax year you can take out either one Maxi ISA or one each of the
three types of Mini ISA, the proceeds of which are tax-efficient. The
Maxi option permits you to invest the full £7,000 annual allowance into
stocks and shares, or up to £3,000 in cash, or up to £1,000 in life
insurance and the remaining amount in stocks and shares up to the £7,000
limit. With Mini ISAs, you are allowed to choose from a cash Mini ISA (£3,000
maximum allowance); a stocks and shares Mini ISA (£3,000 maximum
allowance); and a life insurance Mini ISA (£1,000 maximum allowance).
You can have one of each type of Mini ISA each year, each with a
different company, but you are not permitted to take out a Mini and a
Maxi ISA in the same tax year.
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Q:
Are ISAs good for providing an income?
A:
ISAs
are ideal for generating an income that is also tax-efficient - and
you don't even have to declare any payments you receive on your annual
tax return.
Q:
Can my children have an ISA?
A:
This depends on their ages and on the type of ISA they want.
Anyone over the age of 16 is permitted to have a cash ISA for up
to £3,000. But you need to be 18 to have a Maxi ISA, which includes
stocks and shares and life insurance, or a Mini stocks and shares or
life insurance ISA.
Q: I
want to select my own shares rather than using unit trusts, OEICs or
investment trusts. Can I do this in an ISA?
A:
Yes, through a self-select ISA. You simply decide upon an ISA wrapper
and then choose which shares or other permitted investments you want to
buy within it.
Q:
What are my ISA options?
A:
Follow
our guide to see which ISA you should talk to us about.
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Do you want to invest in stocks and shares through an ISA this year?
YESÞ
NO
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Do you also
YESÞ
want to invest in other assets through an ISA this year?
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You could open a stocks and shares Mini ISA to a maximum of £3,000 in
2004/05. Consider also cash and life insurance mini ISAs (see
below).
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NOÞ
Þ
Þ
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You could invest in a stocks and shares Maxi ISA to a maximum of £7,000
in 2004/05. But note that you may not now invest in other assets
via an ISA.
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Do you want to invest in cash through an ISA this year?
YESÞ
ß
ß
NO
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Do you YESÞ
want to invest in life insurance through an ISA this year?
NOÞ
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You
could open a cash Mini ISA to a maximum of £3,000 in 2004/05
and a life insurance Mini ISA to a maximum of £1,000 in
2004/05.
You could open a cash Mini ISA to a maximum of £3,000 or a cash Maxi
ISA to a maximum of £3,000 in 2004/05.
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Do you want to invest in life insurance through an ISA this year?
YESÞ
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You could open a life insurance Mini or Maxi ISA to a maximum of £1,000
in 2004/05.
Levels,
and bases of, and reliefs from taxation are subject to
change.
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Levels,
and bases of, and reliefs from taxation are subject to change.
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