ISAs are fairly well known throughout the world. They’re a commonly used form of savings account; in fact, the acronym ‘ISA’ actually stands for ‘individual savings account’. ISAs are preferred by many financial consumes because they are free from tax on interest, as well as dividends and capital gains. However, you may not have realised that new rules were put in place at the beginning of July, which transformed the previously recognisable ISA into what’s known as a NISA, or ‘New ISA’.
How Difficult is it to Switch?
If you already had an ISA before July 1st, your account will have been switched automatically. However, if you weren’t using your full financial allowance for the year you may be wondering how you can best proceed with the new system. As with the old ISA, individuals will still be allowed to split their allowance over both cash or stocks and shares, in any way they see fit. However, some of the top NISA interest rates will be reserved for new customers, so it might be worthwhile cashing in your existing pot and opening a new account. As always, explore all of your options before making a decision about how to maximise your financial assets.
The Benefits of Waiting
Because the tax year runs from April to April, you might benefit from waiting a few months before making any changes to your ISA accounts. This is particularly relevant if you’re looking to open a second account of the same type that you already possess; for example, if you’ve already opened one cash ISA account this financial year, you won’t be able to open another cash NISA account until next April.
As set out by government guidelines, the New ISA is intended to encourage savings by being much more generous about how much of an annual tax-free financial allowance consumers are given. Whereas the old ISA regulations gave people an allowance of £11,520, the New ISA sets this cap at £15,000.
Greater Choice for Consumers
An increased contribution limit isn’t the only benefit to be had from the new ISA system. Consumers will experience more flexibility over how they choose to invest their money across a range of approved cash accounts or investments. You will also be able to transfer balances between your accounts as often as you like, although you should remember that these transfers will need to be made direct as the act of withdrawing funds will cause your account to lose its NISA status.
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