Individual Savings Account
An Individual Savings Account (ISA) is a tax-privileged form of investment for UK tax residents.
Forms and economic importance
The basic forms are the Cash ISA ( savings account ) and the Stocks and Shares ISA ( securities account ). Further variants are the Junior ISA for minors, the Help to Buy ISA with a state subsidy of up to 25% of the annual payment for buying a home and, from April 2017, the Lifetime ISA, which is also state subsidy similar to Help to Buy ISA includes, but can alternatively be used either to buy a home or to provide for old age.
In the 2014/15 fiscal year, 61 billion pounds were invested in cash ISAs and 17.9 billion pounds in stocks and shares ISAs. In the UK market, a large number of branch banks and direct banks with ISA offers compete for interested savers.
For every tax citizen a certain deposit contingent is provided per fiscal year, which he can distribute to all his ISA accounts. The quota in the 2017/18 fiscal year is £ 20,000, compared to £ 15,240 in the 2016/17 fiscal year. Payments beyond this are not allowed. Excess funds must be placed in normal taxed accounts but can be transferred to existing ISAs in the next fiscal year.
Compared to a saver lump sum model, as it is used in Germany, ISAs offer the advantage from a saver's point of view that interest and compound interest on the monies paid into ISAs remain permanently tax-free and that considerable tax-free assets are accumulated in an ISA over the years can. There is no income tax or capital gains tax when withdrawing funds from ISAs. The tax exemption of the investment income of the funds once paid into ISAs is retained if a transfer takes place to another ISA, so that the switch to a higher-interest Cash ISA or the shifting of funds between Cash ISA and Stocks and Shares ISA is easily possible. In the event of premature or inappropriate disbursement of funds from ISAs with earmarking for a specific purpose, any government grants will expire.
history
The direct predecessor of the Cash ISA was the TESSA (tax-exempt special savings account) introduced in 1990 . A tax-privileged custody account, the predecessor of the Stocks and Shares ISAs, was known as a PEP (personal equity plan) .
The introduction of the ISA in the UK began in 1999 under the administration of Tony Blair .
In other countries
The British ISAs served as a model for investment forms in several other countries. In Japan, a tax-privileged securities account was introduced in 2014, which is known as NISA (Nippon Individual Savings Account) . Tax law in Malta also knows ISAs, with a maximum annual investment of EUR 1,000.
Individual evidence
- ^ HM Treasury, Lifetime ISA Explained , accessed April 17, 2016
- ^ Kyle Caldwell, Savers pile record £ 61bn into cash Isas despite poor rates on offer , The Telegraph, August 28, 2015, accessed April 17, 2016
- ↑ GOV.UK, Individual Savings Accounts (ISAs) , accessed on April 18, 2016
- ↑ Tomoko Otake: Tax-free account seeks to spur investment. The Japan Times, August 15, 2013, accessed April 18, 2016
- ↑ Individual Savings Account Rules 2014 | ACT Malta. In: www.act.com.mt. Retrieved August 16, 2016 .