Autumn Statement: ISA limits raised - and could include AIM shares
Chancellor George Osborne today announced that the government will consult on allowing shares listed on the Alternative Investment Market (AIM) to be included in a stocks and shares ISA for the first time.
According to HM Treasury: "The government will consult on expanding the list of qualifying investments for stocks and shares ISAs to include shares traded on small and medium enterprises (SMEs) equity markets such as the Alternative Investment Market and comparable markets."
However, investors or smaller AIM-listed companies shouldn't jump for joy just yet. Such a move is unlikely to take effect before the 2014/15 tax year: the Treasury would be keen to fully explore the tax implications of allowing AIM-listed shares into ISAs when investors in many AIM-listed companies already qualify for business tax relief and are exempt from inheritance tax if held for two years or more.
Tony Vine-Lott, director general of the Tax-Incentivised Savings Association, says: "We are particularly pleased that there is to be a consultation on AIM shares and ISAs. It has always seemed to us to be inequitable for these investments to be excluded from a stocks & shares ISA and we have made constant representations to have this changed. We therefore fully support the proposal."
Osborne also announced an increase in the ISA contribution limit to £11,520 in the 2013/14 tax year that begins on 6 April, up from this year's limit of 11,280.
The maximum that savers can contribute to a cash ISA will also increase from £5,640 to £5,760.
Junior ISAs (JISAs) and child trust funds will, for the first time, also have their annual limits increased in line with the consumer prices index, from a current limit of £3,600.
Keith Evins, head of UK funds marketing at JP Morgan Asset Management, says: "Today's announcement to increase ISA limits to £11,520 is good news for savers. But it is not just the ISA limit in itself that is important; we as an industry need to spend more time and effort on transforming 'consumers' into 'savers' and encouraging more people to take out and contribute to savings accounts in general and tax efficient vehicles such as ISAs in particular."
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Alternative Investment Market
AIM is the London Stock Exchange’s international market for smaller companies. Since its launch in 1995, 2,200 companies have raised almost £24 billion listing on AIM. The market has a more flexible regulatory system than the main market and can offer tax advantages to investors but its constituents are a riskier investment than bigger companies listed on the main market.