Time is running out.... and I hate to nag, but if you haven't fully invested in self-select ISA shares this financial year, do it NOW! You have until April 5th. You can put in £7,000 (and another £7,000 the day after in the new tax year).
"What's the point?!" I hear you cry. "There are no advantages anymore..."
You're right in a way. Thanks to recent government action, most of the tax benefits of ISAs have been wiped out, but the big benefit is that there is no capital gains tax to be paid. Remember, you can only make around £8,000 a year in profits. After that, any profits you make on share deals get taxed at your tax rate.
You might well say: "What's the point? You can only put a small amount in, so surely capital gains tax will never be a problem."
So far, I've saved nearly £30,000 in taxes, which I would've had to pay if I had never put all my share money into ISAs, or Peps as they used to be called.
As the years go on and you build your portfolios, the ISA tax advantage becomes more and more apparent. Let's say you build up £150,000 of capital inside your ISAs over the years - perfectly possible. I know of two people who have more than £1,000,000 inside their ISAs. Now, say you have a very good year and turn that £150,000 into £250,000. That's a profit of £100,000. Outside an ISA that profit - if you were a 40% taxpayer - would cost you a huge £36,800 in capital gains tax.
Another example: say you put in £7,000 - and you struck lucky - you bought a penny share that trebled. Sell and you now have £21,000 - that's a profit of £14,000. Inside the ISA - no tax. Outside, your profit will be taxed at £2,400 - assuming you are a higher-rate taxpayer.
So use your allowance! And you can double it easily, if you're married. Get your husband/wife to open one too
then you'll have £14,000 a year to play with, tax free.
Nearly all brokers will manage a self-select ISA in conjunction with shares bought outside. It's worth checking to see if they make any standing charges to look after your ISA. Most do, so expect to pay a little - an average is probably £15 a quarter.
There is no maximum amount you can build in your ISA.
Withdrawal from ISAs can be made anytime, but once cash is taken it cannot be replaced, except with your annual allowance. Once you sell shares within your ISA, you can immediately invest the cash in a new share. You can put anything you like in your ISA, except for AIM or Ofex listed shares.
So, don't be lazy - use your ISA allowance every year! I promise you, if you make good profits on shares, you'll be thanking me for nagging you in a few years time!