Changes To Isa/Pep From 6 April 2008

By David Baker Wealthtime

There are some welcome changes to this regime from the start of the new tax year, although they are rather a simplification exercise than a change of substance.

What should be a relatively straightforward concept has become rather confusing over the years. PEPs – which became defunct years ago – still exist, and their successors were designated Maxi and Mini ISAs – because of the respective amounts you could put into each. You could put up to £7,000 p.a. in a Maxi ISA of which up to £3,000 could be held in cash and the rest in stocks and shares. As an alternative you could split this into 2 mini ISAs – a Cash Mini ISA and a Stocks and Shares Mini ISA. Maximum investment is £3,000 in the former and £4,000 in the latter – so you can currently have two different managers if you want.

From April 6th there will only be a Cash ISA and a Stocks and Shares ISA. All existing arrangements convert into one of these as follows:-

(1) Mini Cash ISAs and any cash component of a Maxi ISA becomes a Cash ISA.

(2) Mini Stocks and Shares ISAs and the Stocks and Shares part of a Maxi ISA becomes a Stocks and Shares ISA.
(3) A PEP becomes Stocks and Shares ISA and, as with all Stocks and Shares ISAs, interest on uninvested cash will be subject to a tax deduction of 20%.

(4) TOISAs become Cash ISAs.

So what are the changes?–

Essentially two –

(1) If you want to invest partly in cash and partly in stocks and shares then you will need to set up two ISAs – one ISA with both components is no longer available. These can be with the same or different providers. Similarly if you have a Maxi ISA with a cash component this will be converted to two ISAs.

(2) You can transfer all or part of the money from a Cash ISA to a Stocks and Shares ISA but if you are transferring monies contributed in the current tax year, the whole balance must be transferred, but this does not work the other way round – you cannot transfer from a Stocks and Shares ISA to a Cash ISA.


The maximum permitted investment goes up to £7,200 per annum. Upto £3,600 can go to a Cash ISA and the balance to a Stocks and Shares ISA. Any minimum will be set by the individual ISA Manager.

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