A NISA? What’s that, do I hear you ask? It was one of the main headlines in March’s Budget and it comes into effect on 1st July, but I’m not sure there is much awareness of it out there. I certainly haven’t seen the wave of promotion that I was expecting in the Media. So let me explain…
You are bound to have heard of ISAs (Individual Savings Accounts) as a vehicle for saving and investing. The current ISA annual limit is a total of £11,880 with up to £5,940 held in the form of cash, the balance in shares. Any interest earned from your investment is tax-free and any gain on investments is also tax-free.
From 1st July 2014, the NISA (New ISA) is introduced, which allows, for the tax year 14-15, a maximum of £15,000 to be invested. BUT the key difference is that for the first time, you can choose whether to use all of your allowance for savings (cash) or for investments (stocks and shares). The allowance is per individual, so for a couple, this could mean annual contributions of £30k could be used to build up a rather substantial tax-free cash savings pot pretty quickly, without the risk inherent in stocks and shares.
I am not an IFA and so I do not give advice as to how you invest any savings that you might be fortunate to have. And, you might say, with interest rates currently so pitiful, it’s not actually a very attractive proposition in terms of immediate returns, and you’d have a point. But the key attraction is that by obtaining the tax-free status for your savings now, and continuing to do so year after year, when interest rates do finally rise (and I think it’s fair to say they will!), the tax savings will seem much, much more attractive.
So, if the dawn of the NISA had passed you by, perhaps it’s worth a moment to consider whether one might work for you.