A Stocks and Shares NISA (New ISA) is arguably the most tax efficient vehicle open to UK investors. You need to be domiciled in the UK but no longer have to be over 18 to enjoy these benefits. If you don’t have a Child Trust Fund for your child and he/she was born after 3rd January 2011 you can open a Junior ISA (JISA). From 16 you can add to a Cash NISA, even if you have a JISA and when 18 transfer all of them to a Stocks & Shares NISA. Very few children have the potential to achieve this level of investment but it could be fulfilled with Family or IHT planning. For example, if you have surplus income you can use this to start them on their way.
From 5th April 2016 the contribution limit is being kept the same at £15,240 p.a. / £1,270 p.m. despite it being planned to rise in line with inflation. It is possible for spouses to move £30,480 of investments/cash each year into NISAs. The JISA limit is still £4,000 p.a.
NISAs are very important investment vehicles as they have the following benefits:-
- Any dividends that are paid into a NISA gross will not be subject to any income tax at any level.
- Nor will they count towards your annual income when working out which tax bracket you are in. It is possible that some clients can drop down a tax bracket with the use of NISAs.
- Any Capital Gains made in a NISA will not be subject to Capital Gains Tax (CGT). Naturally, the opposite applies in that if any losses are realised, they cannot be carried forward to offset capital gains later.
(As at June 2014) If you had invested the annual ISA limit of £15,000 as a lump sum in the average investment company ten years ago, you would now have £42,134. If you had invested the annual NISA limit of £15,000 each year for the past ten years in the average investment company, you would now have an impressive £258,502.
If you had invested the new annual Junior ISA limit of £4,000 in the average investment company eighteen years ago you would now have £16,125. If you had invested the annual Junior ISA limit of £4,000 in the average investment company each year for eighteen years you would have £175,550.