ISA NISA New Individual Savings Account

Published / Last Updated on 17/05/2021

New ISA NISA Explained.  The New Individual Savings Account

Tax free savings for adults and children resident in the United Kingdom (UK)

What if I leave UK?  If you leave the UK, you can no longer pay into an ISA but your existing ISA can remain in place - tax free in the UK but not necessarily tax free in the country that you live in.

History of ISA

The conservative government in the 80's launched the personal equity plan a tax efficient savings plan, where you could save lump sums or in regular premiums.  They also had the Tessa which was a tax efficient bank account.  Labour came into power and launched the ISA where you had either cash or a stocks and shares Isa.

Cash Isa was to replace the Tessa and the stocks and shares Isa was to replace the personal equity plan, so we had the old rules you could have a maxi Isa which was all stocks and shares using all of your allowances or alternatively 2 mini Isa’s, a mini cash Isa and a mini stocks and shares Isa, this was how it was until 2014. 

New ISA Rules Started in August 2014

The old coalition government (Liberal/Conservative) created the NISA the new Isa in 2014.  Cash and Stock ISAs were combined and you can now have any combination of cash or stocks and shares in a new individual savings account a NISA.  Isa’s are taxed privileged investments no tax is paid if it is cash based on your interest that you receive or stocks and shares Isa’s that are capital gains tax free.

There is a slight tax credit deduction on dividends for stock and shares but broadly you receive all of the proceeds tax free.  We also have a separate Isa for children called the JISA or the Jeesa the Junior Isa.

But for adults we have the NISA where you have one total combined yearly allowance, it’s just one total Isa allowance where you can invest in any combination you want.  with Isa’s all as I would suggest is be careful from a charging perspective because interest rates on cash Isa accounts or NISA is pretty much loss of banks and building society’s give you a headline rate and then all of a sudden gradually it starts to come down. 

As far as the stocks and shares element of the NISA just be aware that management charges can vary significantly between Isa groups and what I would do is particularly if you’re looking at stocks and shares based Isa investments get advice from us, because what we will do is charge you a set fee to set up your Isa and what we can then do is keep it very clean where there are no hidden trail commissions or fees paid to advisers and we target the best value for money Isa.

1. ISA Individual Savings Account Allowance 2024

Factfile: Individual Savings Accounts - ISA Allowance

Lump sum investments: Yes

Regular premiums allowed: Yes

Maximum investment (per tax year):

ISA Allowance for Adults 2024

  • 06/04/2024 to 05/04/2025 = £20,000.00
  • Can be invested in any combination of stocks and shares and cash.

2.  Junior ISA Allowance 2024

  • 06/04/2024 to 05/04/2025 = £9,000.00

Flexible payments allowed (stop/start/additional/increase/decrease):  Yes

Investment Risk Profiles Available:

Changing funds and risk profile allowed:  Yes for normal ISA no for Cash ISA

Moving to another company allowed: Yes

Life Insurance Included:  No

Personal Tax Benefits:

  • Capital gains tax free
  • Income Tax Free (except tax credit below)
  • No personal liability to taxes  
  • Investment fund cannot reclaim tax credit on dividends

Can be held inside Trust:  No (many stock market ISAs are already a type of trust)

Suitable For

  • Adults and Children
  • Non Tax Payers
  • Basic Rate Tax Payers
  • High Rate Taxpayers

Insolvency Compensation Limits:

  • Bank and Building Society Accounts - Maximum compensation for insolvency £85,000
  • Investment Company - Maximum compensation for insolvency £50,000.
  • Do not invest more than the above limits with any one company.

Brief Description:

Individual Savings Accounts are virtually tax free and have been available since 6 April 1999.  You can have an New ISA (NISA)  if you are a UK resident adult or a Junior ISA for a child.  

BEFORE ISAs ......

3. PEP Personal Equity Plan to ISA Transfers

Personal Equity Plans ceased to exist with effect from 6th April 2008.  They have now all been converted as Individual Savings Accounts - ISAs

The information below is for historic reference only.

Factfile: Personal Equity Plans PEP

Lump sum investments: No, not anymore

Regular premiums allowed: No, not anymore

Flexible payments allowed (stop/start/additional/increase/decrease): No, not anymore

Investment Risk Profiles Available:

Changing funds and risk profile allowed: Yes

Moving to another company allowed: Yes - ISA transfer plan would have taken place

Life Insurance Included: No

Personal Tax Benefits:

  • Capital gains tax free only up to yearly allowance
  • Income Tax Free
  • No personal liability to taxes
  • Investment fund cannot reclaim tax credit on dividends

Can be held inside Trust: No

Suitable for:

  • Adults - existing PEP/ISA holders only who wish to transfer companies
  • Basic Rate Tax Payers
  • High Rate Taxpayers

Insolvency Compensation Limits:

  • Investment Company - Maximum compensation for insolvency £50,000.  Do not invest more than £50,000 with any one company.

Brief Description:

Personal Equity Plans effectively ceased to exist on 6 April 2008 where they are now all considered ISAs, individual savings accounts.  Personal Equity Plans (PEPs) have been around for a number of years but they can no longer be purchased from 6th April 1999.  Many people still hold PEP investments even though they have been superseded by Individual Savings Accounts (ISAs).  Personal Equity Plans are very much like the stocks and shares portion of an Individual Savings Account although ISAs do enjoy a lot more investment freedom than PEPs.  Even though you cannot take out new PEPs, it is possible to transfer between PEP managers.

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