Stone Life Apr/May 2014 | Page 60

INVESTMENT MATTERS ISA Has Become Nicer Most know about the tax benefits of an ISA, those being: • Tax freedom on capital gains; and • Generally tax-free investment income his tax efficiency means that, all other things being equal, there is more scope for investment returns, given that investment growth can accrue unreduced by taxation. Indeed, for the higher rate (40%) taxpayer and additional rate (45%) taxpayer, an ISA is almost essential as part of the investor’s investment strategy. The price you pay for the tax freedom of an ISA is the restriction on the amount of contributions that can be paid. So, for example, in 2014/15 the maximum total contribution is £11,880 of which up to £5,940 can be paid into a cash ISA with the balance available for a stocks and shares ISA. This ISA allowance cannot be carried forward – you either use it or lose it. Whilst a cash ISA is clearly attractive for a saver who need