At a Glance Guide to ISAs

For anyone who wants to make sure they’re up to date on the latest developments and also for those who haven’t yet used this vehicle, our At a Glance Guide to ISAs will give you a head start.

What is a Self Select Stocks & Shares ISA and who can apply

Self Select Individual Savings Accounts (ISAs) allow UK residents over 18 to invest tax efficiently in shares of their own choice.

What are the different types of Self Select Stocks & Shares ISA and what do they cost

Self Select Stocks & Shares ISAs are either execution-only or advisory.

At present Hoodless Brennan offers an execution-only ISA through our online trading service. It is one of the lowest rate Self Select Stocks & Shares ISAs in the UK charging from £6.50 per trade and an AMC of £50.

You can find out more about the ISAs we offer here.

To compare the costs of different ISAs, log onto www.moneysupermarket.com and use their price comparison chart.

What are the benefits of investing in a Self Select Stocks & Shares ISA

ISAs currently offer generous tax breaks, and whilst it is important to remember that tax rates and concessions can change, it is generally a good idea to use the tax breaks the Inland Revenue allow you. 

There are a number of advantages to investing in a Self Select Stocks & Shares ISA at present, including:

• ISAs are currently free of Capital Gains Tax.  Since 1900, UK shares have grown at an average 9.6% per year.*  Investing in a Self Select ISA allows investors  to invest directly in equities and participate in such capital growth without paying any capital gains tax.

• If you hold share certificates at home, you should consider transferring them to your general online dealing account and then trade them into an ISA account, up to the value of the available subscription limit, thereby saving on any potential Capital Gains Tax and reducing tax paid on dividends.

• By managing the investment yourself through a Self Select Stocks & Shares ISA your charges could be lower than through a Unit Trust ISA. 

• Investments in an ISA can be sold at any time you want, so a good medium-term saving scheme.

• If you are a higher rate taxpayer, you don’t need to disclose ISA investments on your tax return and your dividends are taxed at 10% not 32.5%.

• Dividends taken as income from an ISA can boost pensions without raising your income tax, ISA income is not added to your earnings, so does not increase your tax liability.

* As stated by Daily Mail 22^nd Feb 2005

Are Self Select Stocks & Shares ISAs risky

With Self Select Stocks & Shares ISAs, you can vary or tailor the degree of risk according to your own circumstance or preferences. There are numerous options available which allow the investor to set their own investment strategy.  For example:

Investing for income:

• Select large Blue Chip companies if you want low risk and dividend income.

Investing for balanced growth and income:

• If you want low risk yet capital growth, you can buy companies across a range of different sectors. This gives you a basket of shares and could provide downside protection from falls in one sector with upside exposure to other sectors.

   

• Re-invest dividends so that your portfolio grows.  For example, companies such as Lloyds TSB and United Utilities historically have produced good dividends for its shareholders.  Re-investing your dividends will increase the compound growth of your portfolio as well as allowing you to benefit from any rise in the basic share price.

   

Investing for Capital growth:

• Buy a diversified Tracker Funds to spread the risk, such as IShares or Exchange Traded Funds (ETFs) which move with the underlying basket of shares – for example a FTSE 100 IShare moves up or down in accordance with all the shares in the FTSE 100. This spreads the risk **

• IShares provide a diversified investment at lower cost than Unit Trusts, which charge an average 5% initially and 1% per annum.  IShares only cost the broker commission and are Stamp Duty free.

• Tailor your Self Select Stocks & Shares ISA to be racier by targeting a particular company or market sector.

** For more information on ETFs and IShares visit: www.londonstockexchange.com