Last-minute Isa freebies and bargains
Several providers are offering financial incentives if you transfer to them. Among them is stockbroking platform IG, which until 30 April is offering exchange traded funds commission-free for anyone with one of its stocks and shares Isas.
Also waiving some of the charges on their Isas are investment trusts Caledonia and Witan. Any new customers taking out a Caledonia Isa before noon on 5 April will have their first year's administration fees waived, saving £20 plus VAT.
For those investing £2,000 plus in the Witan Wisdom Isa, or topping up with at least £1,000 by 30 April, Witan will waive its £15 dealing fee.
TD Direct Investing is also looking to win business with a cashback deal. Transfer into an Isa, Junior Isa, Sipp or trading account before 5 April, and if your transfer includes at least £10,000 of investment funds, you'll get cash back.
You'll need to keep your account open for 12 months to qualify, but as with many things, the more you transfer, the bigger the welcome.
For example, between £10,000 and £49,999 will bag you £50 in cash, £100,000 to £499,999 will get £500 and over £500,000 will qualify for the maximum £1,000.
Rather than give everyone a freebie, some of the platforms are looking to whip up end-of-year business by entering new Isa customers into a prize draw, in some cases giving them the chance to double their money if their Isa account is pulled out of the hat.
This is the case for both Fidelity and Hargreaves Lansdown. At the former, you need to invest a lump sum into a stocks and shares Isa before 31 March; you will then be entered into a prize draw with five chances to double this amount.
At Hargreaves Lansdown, the prize draw is available for any investment made before 22 April into its Vantage stocks and shares Isa, Junior Isa, Sipp, or fund and share accounts.
If you win, your winnings will be a lump sum equal to whatever you invested between 2 February 2016 and 22 April 2016, subject to a maximum value of £40,000.
Also looking to attract investors who are feeling lucky, the Share Centre is offering 15 chances to win £1,000 in its prize draw; it's open to anyone who invests at least £1,000 into a new or existing Isa before 5 April.
Extra tax treats
For higher-rate taxpayers, investment manager Downing is looking to appeal to those seeking to reduce another tax - inheritance tax (IHT) - with its Aim Isa.
This invests in a portfolio of at least 20 Aim-quoted companies; after two years, and providing you hold it until death, your investment will be exempt from IHT. As an extra sweetener Downing has removed the initial charge, which is normally 2%, on applications received by 29 April.
Another provider hoping to attract more Isa investors looking for IHT planning opportunities is Octopus Investments. Like Downing, its Octopus Aim IHT Isa invests in Aim-quoted companies to take advantage of the business property relief that's available after two years.
It's also slashed its initial charge, reducing it from 2.5 to 0% on advised sales and from 5 to 1% on non-advised sales.
If you're looking for an Isa home for your savings, you may be a little disappointed by what's on offer. Sue Hannums, director at Savingschampion.co.uk, describes this year as the worst Isa season she's ever seen.
“The cash Isa providers are usually battling for top spot by now, but instead we've seen rates slide,” she explains. “The providers just don't seem to be bothered about cash Isas any more.”
The reason for this is the forthcoming personal savings allowance, which will give savers a tax-free allowance of £1,000, or £500 for higher-rate taxpayers, from April. This will mean many savers won't pay tax on their savings wherever they deposit them.
Unfortunately, a comparison of the rates on offer gives even more incentive to steer clear of cash Isas.
If you're looking for an easy access home for your savings the best Isa rate is 1.41% from Virgin Money, which is easily beaten by the best taxable savings account at 1.55% from RCI Bank.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Like a self-select ISA but for pensions, self-invested personal pension is a registered pension plan that gives you a flexible and tax-efficient method of preparing for your retirement. It gives you all sorts of options on how you put money in, how you invest it and how it’s paid out and offers a greater number of investment opportunities than if the fund was managed by a pension company. SIPPs are very flexible and allow investments such as quoted and unquoted shares, investment funds, cash deposits, commercial property and intangible property (i.e. copyrights, royalties, patents or carbon offsets). Not permitted are loans to members or people or companies connected to the SIPP holder, tangible moveable property (with the exception of tradable gold) and residential property.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
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.