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What is an ISA?

An Individual Savings Account (ISA) is a tax wrapper that allows you to save, either in cash or stocks and shares, without paying any tax on the money in the wrapper. This includes keeping any growth received from the investment tax-free. This is not the case with, for example, an ordinary bank or building society account unless you are a non-taxpayer.

ISAs began on the 6th of April 1999 and will be around for the foreseeable future. The ISA allowance for the 2018/2019 tax year is £20,000.

There are two types of ISA: cash ISAs, and stocks and shares ISAs. In each tax year, you can put money into one of each. Cash ISAs may be suitable for short-term savings so that you can get at your money easily.Stocks and shares ISAs may be appropriate if you can afford to leave your money untouched for longer than, say, five years. However, your investment may go down in value as well as up and there are no guarantees that you will make a profit.

 

What are the tax benefits of an ISA?

You pay no tax on any of the income/growth you receive from your ISA savings and investments. This includes dividends, interest and bonuses, but an ISA investor cannot claim the tax credit, which is attached to a dividend.

You pay no tax on capital gains arising on your ISA investments (losses on ISA investments cannot be allowed for Capital Gains Tax purposes against capital gains outside your ISA).

You can take your money out at any time without losing tax relief.

You do not have to declare income and capital gains from ISA savings and investments or even tell your tax office that you have an ISA.

How can I open an ISA account?

It takes only 10 minutes to open an online ISA account – the online application can be found here.

The minimum investment is £10,000 and you must be:

  • aged 18 and over
  • living in the UK with a UK bank or building society account
  • and you must be a UK resident for tax purposes.

If you want to find out more regarding opening an ISA or transferring one – contact us at enquiries@scmdirect.com

Transfer an ISA

If you have an existing ISA with another provider, you can transfer your ISA to an SCM Direct stocks and shares ISA whenever you wish. We accept partial transfers of an ISA (subject to our £10,000 minimum investment being met).

You cannot transfer your ISA by closing it and opening a new stock and shares ISA with us.

Your existing ISA manager cannot stop you transferring, but they may make you pay an exit charge, or make a charge for selling your existing ISA investments; as SCM Direct only accepts cash transfers (you may want to consider this before transferring your ISA).

The ISA rules allow you to transfer between stocks and shares ISA and cash ISAs as you wish. HOWEVER, if you want to transfer the money you have put into your ISA in the current tax year, you must transfer all of it.

You can also transfer all or some of the money you have been putting into your ISA in previous years if you wish.

You can start the process here.

Why a stocks and shares ISA might be perfect for you

A stocks and shares ISA could be for you if:

  • You would like to take advantage of tax-free savings, including not paying tax on any capital gains and income, remembering that any tax already deducted from dividend income cannot be reclaimed
  • You are looking to invest for at least five years
  • You haven’t used up your full ISA allowance for the current tax year, and
  • You understand that the value of your investments can go both up and down and that you may get back less than you invested

It is worth noting that the long-term annualised real return (i.e. the return after inflation) from investing in a mix of bonds, equities, and cash has shown that historically this mix has produced higher returns than cash savings accounts. But note – with higher likely returns tends to be accompanied by higher risk.

 

Junior ISA

Junior Individual Saving Account (JISA) is a long-term tax-free saving account for children. A JISA allows you to save for your child’s future, in stocks and shares, without paying any tax on the money invested in the wrapper; including any growth received.

Your child must be under 18 years old and living in the UK.

There are two types of JISA: a cash JISA and a stock & shares JISA.  SCM Direct only offers a stocks & shares JISA where you will not pay tax on any capital growth and dividends received in each tax year. Your child can have one or both types of JISA, anyone can pay money into a JISA but the total amount cannot exceed the saving limit of £4,260 for the 2018/19 tax year.  For example, you can invest £1,500 in a cash JISA and £2,760 in a stocks & shares JISA.

A JISA can be opened by parents, grandparents or guardians with parental responsibility but the investment belongs to the child, and they can take control when of the investment when they reach 16 years old but cannot withdraw the money until they are 18 years old.

 

Open an ISA

Create a new ISA account

Start today
Transfer your ISA

Transfer your ISA to SCM Direct.

Transfer today

Frequently Asked Questions

Are there any documents I will need to complete offline?

This will vary from person to person. If you are resident and bank in the UK it may not be necessary to send any further documentation. However you may be asked to provide further evidence of your identity or bank details.

 
Any investors choosing a USD$ Portfolio will be required to complete a W8 – the W8 form is provided by the Internal Revenue Service (IRS) to allow non-US persons to receive a reduced rate of taxation on any US-sourced income (including dividends, interest etc.) received from businesses registered or incorporated within the US.

 
There may also be other paperwork as a result of the FATCA requirements (Foreign Account Tax Compliance ACT).

Can I add to my investments using a debit or credit card?

Not at present.

Can I change the portfolio in which I am invested?

Yes. You will need to send us a secure message instructing the portfolio to be sold and the new portfolio you wish to invest in.

You must ensure that the amount to be invested exceeds £10,000 for a GBP portfolio (if you are a UK investor with a UK bank account) otherwise it is £100,000, and it is $100,000 for a USD portfolio and €100,000 for a EUR portfolio.

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