ISAs (Individual Savings Accounts) are one of the only means of saving and investing without having to give a cut of the profits to the taxman.

Paying no income or capital gains tax on any returns you make from your investments within an ISA means that your returns will generally be higher. This means that if you have any savings or investments you should think about making the most of your annual ISA allowance before choosing any other means.

What is an ISA?

An ISA is effectively a wrapper that protects a predetermined amount (up to £10,200 for the 2010/11 tax year) of your savings and investments from income and capital gains tax. ISAs were introduced by the government to encourage people to save.

It is important to note that an ISA is not a type of investment; it is an amount of money that you can protect from tax each year. Where you save or invest this money is up to you.

How can you use your ISA?

Most investments are allowable within an ISA; these include investment funds, structured investments, Exchange Traded Funds and passive investments. There’s also a wide range of cash ISAs and deposit based investments to choose from for any of your cash ISA allowance (up to £5,100).

Are you making the most of your ISAs?

This tax year (2010/11) you can invest up to £10,200 into an ISA, £5,100 of which may be invested into a cash ISA product. If you invest in a cash ISA any remaining allowance
can be invested in a stocks & shares ISA.

This allowance is per person (over 16 for cash ISAs/over 18 for stocks & shares ISAs), which means that a husband and wife can protect up to £20,400 for this tax year.

New ISA allowance

In last year’s Budget it was announced that going forward the ISA allowance will increase in line with RPI inflation each year.

The RPI rate of inflation in September will determine what the ISA allowance will be the following April. It was 4.6% last September, bringing the new allowance up to £10,680, or £5,340 for cash ISAs.

Invest early

The earlier you invest your ISA allowance in a tax year, the longer any returns you receive from them will be protected from income or capital gains tax, meaning your overall returns will be higher.

If you have used previous years’ ISA allowances, making the most of them will be just as important as investing this year’s allowance.

If you are not happy with the returns you are making on your existing ISA investments, you could transfer them into something new without losing the protective tax wrapper.

Ideas for your ISA

At Fair Investment Company we are dedicated to helping you to make the most of your savings and investments, bringing you research, investment opportunities and services.

Our ISA and Investment Account brings you access to a whole range of ISA investment opportunities, from leading investment managers.

Take advantage of new investment ideas including emerging markets, commodities, passive investments and Exchange Traded Funds, all within your ISA wrapper.

The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.

Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment.If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

© Fair Investment Company Ltd