Share Isa

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Category: Shares

An Individual Savings Account (ISA) is a financial product available to residents’'. It is designed for the purpose of investment and savings with a favorable tax status. Money is contributed from after tax income and not subjected to income tax or capital gains tax within a holding or upon withdrawal. Cash and a broad range of investments can be held and there is no restriction on when or how much money can be withdrawn. Funds cannot be used as security for a loan. It is not a pension product but can be a useful complement to a pension for retirement income, particularly when it is desirable to draw down capital at a faster rate than permitted in a pension.

ISAs were introduced on 6 April 1999, replacing the earlier Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). ISAs were explicitly designed to appeal to a broader range of the population than these earlier products, which were sometimes claimed to be exclusively for the benefit of the middle classes. Other channels for tax-privileged savings exist that also pre-date ISAs, notably the National Savings and Investments, which is a state owned bank offering a range of non-ISA tax free accounts (in addition to its own ISAs.). With a few exceptions, such as from an employee share ownership plan, all investor contributions must be in cash.

The money is invested in 'qualifying investments'. Except for cash there must be a credible possibility of losing at least five percent of the investment, otherwise the investment must be held in cash ISA instead qualifying investments are: cash "awaiting investment". There is no specific time limit on how long cash can be held. The test is whether the ISA manager believes the money is being held for future investment, instead of as a way to pay only the 20% charge on cash interest instead of a higher rate of income tax, which would circumvent the cash ISA contribution limit.

UCITS authorized funds like unit trusts and OEICs. Investment trusts that satisfy various possible conditions. Stock market company shares listed on one of the many recognized stock exchanges. Merely being traded is insufficient, it must be a full listing, and this excludes AIM' PLUS-quoted and PLUS-traded market segments, but PLUS itself is acceptable; shares in unquoted companies; warrants; futures and options. Public debt securities such as government, corporate bonds, debentures and Eurobonds which have at least five years of their term remaining. Conditional redemption, such as that based on possible future market performance, is acceptable, as is the borrowing company or government redeeming the security early or exercising of options if there are defaults, insolvency risks or covenant breaches.