your ISA questions answered
everything you need to know about
individual savings accounts and more
Your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you originally invested. A Mercantile Circle ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek independent financial advice.
what is an ISA?
Individual Savings Accounts (ISAs) are a little tax-free gift from the UK government, so you really should be making the most of them. You can contribute into your ISA every year; however, the amount is dependent on the government’s allocation for that year.
Savers can choose to invest in two types of ISA – either a Cash or Stocks and Shares ISA, or split between the two. An individual can only contribute money into one Cash ISA and Stocks and Shares ISA in each tax year.
The question for many of us is “what’s the best option?” We explore both options below.
A Cash ISA is considered in most cases as a basic savings account, with most high street banks offering several types. An instant access account gives you greater flexibility but offers a lower rate of interest, whilst fixed accounts promise a higher rate of return providing that you don’t touch the money for an agreed period of time.
Cash ISAs have been offering disappointing returns for several years now due to a trending all time low with the base interest rate – as such many savers are looking to Managed Stocks and Shares ISAs to boost their savings.
A Cash ISA protects your capital, which means you won’t lose any of the money you put in, but the trade-off for this security is a much slower pace of growth for your savings pot. Essentially you’ll be exposed to the risk of inflation, which can inevitably erode your moneys spending power.
To sum it up a Cash ISA is only a safer bet for short-term savers. If you foresee the need to access your money within the next couple of years – perhaps for an emergency or a holiday, then leaving your money in cash would be deemed as a more sensible option – think of it as a place to park your money.
Stocks and Shares ISAs
We’ve seen a huge surge in the number of savers turning to fully managed Stocks and Shares ISAs to boost their savings. A very different type of product to the Cash ISA, Managed ISAs are best described as a ‘wrapper’ rather than an account, protecting your returns from tax regardless of where it is invested. If your savings plan is long-term, investing your money in a diversified portfolio managed by an expert portfolio manager is the smartest option.
Designed to deliver much higher returns than cash ISAs, Managed ISAs do offer a higher level of risk, but this can be very much tailored to your individual circumstances and your attitude to risk. Expert portfolio managers will seek value in the market to ensure you obtain the greatest returns possible for your investments.
It is however important to note, that unlike a Cash ISA, any capital you put into a stocks and shares ISA is not protected and the value of your investments could go down as well as up. Your money does however have much more potential to grow over the long-term.
At Mercantile Circle we offer a fully-managed Stocks and Shares ISA solution, otherwise known as a ‘Managed Investment ISA’. Discover more>>
what is the 2017/18 ISA allowance?
You can contribute into your ISA every year; however the amount is dependent on the governments allocation for that year.
Currently you can invest up to £20,000 in an ISA. The 2017/18 tax year, runs from 6 April 2017 – 5 April 2018 so make sure you use it, or you’ll lose it for good. You can spilt this allowance between a Stocks and Shares ISA or a Cash ISA, or mix and match both.
Any savings or investments which stay within the tax-free ISA wrapper will continue to earn interest and reap the tax benefits until you withdraw the money.
who can open an ISA?
You need to be a UK resident aged 16 or over to open a Cash ISA, or aged 18 or over to open a Stocks and Shares ISA. You’ll also need to need to be a UK resident for tax purposes and you can’t open an account together with someone else or on behalf of someone else.
transferring or switching ISA
why transfer an ISA?
With cash ISAs currently offering disappointing returns; now may be the time to consider a fully-managed Stocks and Shares ISA to achieve much greater returns and secure your nest egg for the future.
You can transfer both Cash ISAs to Stocks and Shares ISAs and visa versa. At the circle we offer a fully-managed Stocks and Shares ISA solution. It is very important to remember the golden rule when it comes to transferring an ISA – it is recommended to not withdraw the money yourself, you’ll lose all of the tax benefits that you have accumulated over the years almost instantly. We recommend leaving it to the experts or seeking independent financial advice if you are unsure.
what are the benefits of switching provider?
you’ll save money
By transferring all of your ISAs to one provider and consolidating your savings, you’ll almost certainly be saving yourself a good few pennies. Chances are that you’re paying higher management fees for your other Stocks and Shares ISAs – consolidating to a provider that charges lower management fees, means more money for your savings pot. At the circle we keep our fees low, with no hidden charges – so you’ll always know how much you are paying. We won’t charge you a transfer fee either; however many companies do.
greater potential returns
Compared to Cash ISAs, the returns on Stocks and Shares ISAs have shown to be far greater. Yes there is an element of risk attached to such an ISA and you could lose money, but the potential to benefit from the stock market, with long-term returns speak for themselves. Rescuing your current ISAs from mediocre interest rates while retaining their tax-free status could really stack up. You should look to invest in a company that offers a diversified portfolio of investments, rather than just access to a single fund or individual market – the risk is greater spread. Check out our diversified portfolio>>
keep everything in one place
Consolidating your ISAs in one place will not only save you money, but time and worry. You’ll have complete transparency as to how all of your ISAs are performing if held within one portfolio. You won’t need to worry about juggling various accounts and contributing into each, we’ll do the hard work. Not only will they retain their tax benefits but we’ll refresh your ISA allowance each year, whilst constantly monitoring and rebalancing your portfolio.
expert management and regular rebalancing
Many people think they have to be an investment expert to open a Stocks and Shares ISA. You don’t. You just need a provider that will take the time to understand your investment goals, your attitude to risk and build a portfolio in line with this. At Mercantile Circle our expert team work hard to build tailored portfolios for each of our clients. Once you’re up and running we’ll keep on top of market fluctuations, whilst monitoring and rebalancing your portfolio to keep it on track, so that you don’t have to.
if i transfer an ISA will it count towards my ISA allowance?
ISA transfers do not count towards your annual ISA allowance. Any additional savings or investments you make within the tax year on top of your existing ISA savings and investments, will count towards your annual allowance for the tax year. An ISA transfer does not count as a new ISA subscription, so if you are transferring ISAs from previous tax years, this has no impact on your ISA allowance for the current tax year.
how to transfer an ISA to the circle
1. sign-up for our free suitability assessment
The aim of the suitability assessment is to fully understand your current financial position and your vision for the future. This will help inform Mercantile Circle of your ISA suitability, and how we can work with you to achieve your goals.
2. once we identify your suitability, you’ll just need to fill out our ISA transfer forms and sign our ISA letter of authority, then leave the rest to us
Once we identify your ISA suitability, we’ll send you a pack including ISA transfer forms and letters of authority. These will enable us to work with your current provider to transfer your ISA to us — safely and securely.
You can transfer both Cash ISAs and Stocks and Shares ISAs to Mercantile Circle. In both cases, they will be managed as Stocks and Shares ISAs.
Any Stocks and Shares ISA that is transferred won’t hold the same investments as before. We instruct the current ISA manager to sell the investments and transfer the ISA as cash for us to invest. This preserves your ISA’s tax-efficient status and allows us to manage it in the most appropriate way for your goals, timeframe and attitude to risk.
what are the tax benefits of an ISA?
ISAs are exempt from any personal liability to UK income tax and capital gains tax. As a result, you do not have to declare any income and capital gains from an ISA on any self assessment tax return you may need to send to HM Revenue and Customs.
Dividend Income received within your ISA does not count towards your annual Dividend Allowance and any interest received does not count towards your Personal Savings Allowance.
This is based on our understanding of current UK tax law and HM Revenue and Customs. Tax benefits, law and practice may of course change in the future. If you are unsure about your own situation you should contact a financial adviser.
You will not receive interest on any cash held in your ISA account.
Disclaimer: The investment projections we show are never a guaranteed predictor of future performance – they are there to give you context and help you make decisions about the kind of portfolio which may best suit your individual investment goals. You should not base your investment decision on past performance. With investment, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. If you are unsure if any of our products are the right choice for you, please seek independent financial advice.
Mercantile International Limited is an Appointed Representative of Agincourt Financial Limited who is Regulated in the United Kingdom by the Financial Conduct Authority with Firm Reference No.:197236. Company Registration No.: 09929738 in England & Wales | Mercantile Circle is a trading style of Mercantile International Limited.