ISAs, PEPs and TESSAs Guide

ISAs (Individual Savings Accounts)

Other Questions

I am under the age of 18 – can I take out an ISA ?

If you are aged 16 or 17 you can take out a cash ISA. This can be either a mini cash ISA or a maxi ISA where you can only put money into the cash component. The subscription limits are the same as for savers who are over 18/ so you can subscribe up to £3/000 in each tax year.

If you are aged 15 or under, you cannot take out an ISA.

Can I put money into my 16 or 17 year-old child’s ISA ?

ISAs for 16 and 17 year-olds are intended primarily for those in full or part-time employment, including those still at school with, for example, Saturday jobs, but ISAs will also be used by some young people to save money given to them by their parents. If you give your child money to invest into an ISA account, and the total investment income arising on all gifts from you, not just in ISAs, exceeds £100 in any tax year, all the income arising will be treated as part of your income for that tax year for income tax purposes. You should report that income to your Tax Office.

This rule does not prevent you from giving your child money to invest in an ISA you just have to take care not to give your children too much. The £100 income limit for each child applies to each parent, not to both taken together.

I am 17 and have a cash ISA-what happens when I reach the age of 18 ?

If you have put money into a mini cash ISA in the tax year in which you reach 18, you can go on doing so on and after your 18th birthday, subject to the normal limit. Once you have reached 18 you can also apply to open a stocks and shares Mini ISA and/or an insurance Mini ISA for that tax year, and will have to complete a new application for either of those, in the same way as any other investor.

If you have been putting money into the cash component of a maxi ISA in the tax year in which you reach 18, you can go on doing so on and after your 18th birthday, subject to the normal limit. Once you have reached 18, you can also put money into the stocks and shares and insurance components of your Maxi ISA. In any of these situations you will not have to complete a new application.

Remember that you cannot put money into a cash mini ISA and a maxi ISA in the same tax year.

What about employee share schemes and ISAs ?

If you are in an Inland Revenue approved all-employee share scheme run by your employer, that is, a savings related share option – ‘Sharesave’ – or profit sharing scheme or the new Share Incentive Plan, then you can transfer any shares you get from that scheme into the stocks and shares component of an ISA without having to pay Capital Gains Tax, provided your ISA manager agrees to take them.

The value of the shares at the date of transfer counts towards the annual limit. This means you can transfer up to £7,000 – worth of shares in each of the tax years 2001 /2002 to 2005/2006, or £5,000 in any later year from 2006/2007 (assuming that you make no other payments to ISAs, except a TESSA-only ISA, in those years).

Remember that if you want to transfer more than £3,000-worth of shares you must have a Maxi ISA. See here for further details.

The shares must be transferred within 90 days from the day they emerge from the scheme (or, in the case of an approved profit sharing scheme, from the third anniversary of the date the shares were given to you, if earlier).

Your employer should be able to tell you more.

Can I put windfall shares into my ISA ?

No. You can only transfer shares you own into an ISA if they have come from an employee share scheme of the kinds shown on page 12. Otherwise shares must be purchased by the ISA manager in the open market.

The situation is the same if you have shares that you have inherited. You are not able to transfer them into an ISA.

Can I use an ISA to back a mortgage?

Yes, the proceeds from ISA investments can be used for any purpose, but you should discuss the implications with your financial adviser or mortgage lender.

Can I get reports and accounts of the companies in my stocks and shares ISA?

Yes. Your ISA manager can arrange for you to receive reports and accounts, although there may be a charge. You may also be able to attend and vote at the annual meeting of companies in which your ISA invests.

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