What does the change from ISA to NISA mean for you?

ISAs – or Individual Savings Accounts to give them their full name – have always been a tax-efficient way of holding cash, shares, bonds and collective investments such as unit trusts. They are about to become even more attractive as an investment from 1st July 2014.

What’s the current limit?

The current 2014/15 ISA allowance lets you save up to £11,880 in an ISA without paying any tax on the income or capital gain it generates. The whole amount can be invested in a stocks & shares ISA, or up to £5,940 can be put into a Cash ISA.

What’s the new limit?

From 1st July 2014, the ‘New ISA’ (NISA) limit will be £15,000 and you will have complete freedom to invest this in cash, stocks & shares or any combination of the two. You will also be able to transfer ISAs from previous years between stocks & shares and cash without any constraints.

Should I combine my cash ISAs and stocks & shares ISAs in one place?

It’s worth noting that, from 1st July, any interest on cash held in a stocks & shares NISA will tax-free. This means that you could have just one NISA, rather than one NISA for cash and one for stocks & shares. You might be attracted by the simplicity of this but you might not get the best rate of interest on the cash element, so you might want a separate cash NISA if you want a competitive rate. Remember, though, that you can only have one cash NISA and one stocks & shares NISA in any given tax year.

What happens between now and 1st July – and then after 1st July?

Any ISA subscription made between 6th April and 30th June 2014 will count towards the annual £15,000 NISA allowance. You will not be allowed to open a new NISA for the current tax year from 1st July but will have to top up the existing account (or accounts if you have separate cash and stocks & shares NISAs). Check the terms and conditions on any ISA you open before 1st July – particularly if fixed-rate cash ISAs which do not always allow top-ups.

Are there any new investments now included in NISAs?

Yes, you will be able to hold corporate bonds with less than five years left to maturity in your stocks & shares NISA. There are likely to be other new products developed that will provide greater choice in the future.

Should I wait until 1st July before making any ISA contributions this year?

No, there is no reason to wait. You can contribute up to £11,880 in a stocks & shares ISA or £5,940 in a cash ISA now and then top up to £15,000 in any way you choose from 1st July.

Don’t forget – USE IT OR LOSE IT. At the end of each tax year, you will lose any unused NISA allowance, so make sure you act in good time and do consider taking expert, independent advice.