PwC ISAs – A Tax Efficient Investment? Neil Wright 29 January 2004 ©2001 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.

PricewaterhouseCoopers The Tax Benefits of ISAs – Capital Gains Tax (CGT)  Gains made on assets sold within ISA are free from CGT  Gains made on assets withdrawn from ISA are free from CGT  Approved all employee share schemes/SAYE etc  90 days  Market value on date of transfer  ISA is not exempt from Inheritance Tax  Effect of  Death  Moving overseas

PricewaterhouseCoopers The Tax Benefits of ISAs – Income  UK Dividend Income  Now received with a non reclaimable tax credit of 10%  Until 5/04/2004 one/ninth of the dividend distribution can be reclaimed  After 5/04/2004 no reclaim available  Interest  Tax free  Interest on cash held in stocks and share component or insurance component is taxed at lower rate

PricewaterhouseCoopers ISAs Compared To Other Investments  Individual Pension Contributions  Tax relief on contribution  Tax on fund  Tax on benefits  Flexibility  Unit Trusts/OEICS/Investment Trusts (i.e. Collective Investment Schemes)  Tax on gains inside fund  Tax on gains realised by investor  Tax on income

PricewaterhouseCoopers ISAs Compared To Other Investments  Insurance Bonds (onshore)  Tax on income  Tax on gains made in the policy  Tax on gains realised by investor  Tax charge on death  Insurance Bonds (offshore)  Differences with onshore  Going overseas  Highly personalised bond rules

PricewaterhouseCoopers How Attractive Are ISAs?  If you want tax relief on investment  Pension contributions  Tax efficiency for income on investments  ISA/Pension Scheme  Onshore insurance bond for higher rate tax payer  Collective Investment Schemes  Offshore insurance policy  Tax efficiency for gains made inside fund  ISA/Pension contributions/Collective Investment Schemes/Offshore insurance policy  Onshore insurance policy

PricewaterhouseCoopers How Attractive Are ISAs?  Tax efficiency on amounts/gains realised from investment – higher rate tax payer – long term investor  ISA  Collective Investment Scheme (particularly if CGT allowance available)  Pension scheme  Onshore insurance policy  Offshore insurance policy  Basic rate taxpayer?  As higher rate tax payer

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