• 1. ISAs are available indefinitely

  Previously, ISAs had the backing of the Government as a primary savings vehicle until 2010, but were subject to review. The Government has now confirmed that ISAs will carry on indefinitely.

• 2. A new structure and allowance will be introduced

  The current structure of ISAs allows you to invest in either a Maxi ISA or a Mini ISA in the same tax year, with an overall subscription limit of £7,000 across both types.

  This Maxi and Mini distinction within ISAs will be removed. Instead, ISAs will simply be distinguished as being a Cash ISA or a Stocks and Shares ISA.

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  Each individual will have an increased annual ISA investment allowance of £7,200. Up to £3,600 of that allowance can be saved in a Cash ISA with one provider. The remainder of the £7,200 can be invested in a Stocks and Shares ISA with either the same or another provider.

  Example 1
  An individual is interested in investing all of his allowance in shares. He opens a Stocks and Shares ISA on 20 April 2008 and invests the full £7,200.

  Example 2
  An individual opens a Cash ISA on 16 April 2008 and subscribes £1,000. On 2 July 2008, she inherits £10,000 and wishes to invest as much as possible. She could save up to another £6,200 in ISAs. This could be achieved by investing up to £2,600 in the same Cash ISA or up to £6,200 in a Stocks and Shares ISA with either the same or another provider.

• 3. PEPs will become ISAs

  All PEP accounts will automatically become Stocks and Shares ISAs on 6 April 2008, and will become subject to ISA rules and regulations.

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  This means that all PEP holders will now hold a Stocks and Shares ISA from 6 April 2008 and will be able to subscribe to it in the same manner as any other ISA i.e. up to £7,200 a year.

  PEP holders should note that interest on cash balances is treated differently under ISA regulations. The current PEP rules mean that interest on cash is paid gross within the PEP and is only taxed once £180 of interest on cash is withdrawn from the account. This rule will no longer apply. Instead, under ISA rules, interest on cash is paid subject to a 20% HM Revenue and Customs charge.

• 4. Transfers from Cash ISAs to Stocks and Shares ISAs will be possible

  Under current regulations, investors cannot transfer funds between cash components and stocks and shares components. From 6 April 2008, savers will be able to transfer money from Cash ISAs to Stocks and Shares ISAs.

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  The rules here are twofold:
  a) If an individual wishes to transfer money saved in a Cash ISA in the previous tax year, they can transfer either the whole amount or part of it. The transferred money will not affect the individual's annual ISA allowance for the current tax year.
  b) If an investor wishes to transfer money saved in a Cash ISA in the tax year that is current, they must transfer the whole amount. The transferred amount will be treated as if it had been invested directly into a Stocks and Shares ISA in that tax year. The saver is still able to save up to the full remaining balance of their £7,200 annual ISA investment allowance in ISAs in that tax year, including up to £3,600 in a Cash ISA.

  Remember that, under ISA regulations, cash held in a Stocks and Shares ISA should be invested. You may be required to demonstrate that, as HMRC regulations explain, you are “actively seeking an investment”.

• 5. Child Trust Funds (CTFs) will be allowed to roll over into ISAs on maturity

  With the guaranteed extension of the ISA, the government has confirmed that CTFs will be able to roll into ISAs when the CTF matures on the child's 18th birthday. This ensures that savings built up over time can continue to be held in a tax-efficient manner. As CTFs were only introduced in recent years, the earliest opportunity for this to happen will be 2020.

How this affects your Selftrade account

As a result of the changes to the PEP and ISA regulations, you will see the following changes to the Selftrade service.

• 1. We currently offer a Maxi Stocks and Shares ISA with an annual subscription limit of £7,000 or a Mini Stocks and Shares ISA with an annual subscription limit of £4,000. From 6 April 2008, we will only offer one type of ISA, called the Shares ISA. This will be a Stocks and Shares ISA with an annual subscription limit of £7,200.
  
  Existing Selftrade Maxi and Mini ISAs will be renamed 'Shares ISA' and the subscription level will be increased to £7,200.
• 2. The Selftrade PEP will become a Shares ISA. PEP investors will be able to start subscribing to this ISA from 6 April 2008.
• 3. Customers who hold both a Selftrade PEP and a Selftrade ISA prior to 6 April 2008 will only hold one Shares ISA after 5 April 2008. Existing PEPs and ISAs will be merged into one account, with the benefit that you will see all holdings in one portfolio, and have only one account to manage.

Selftrade account before 6 April 2008	Maximum annual limit	New account name from 6 April 2008	Maximum annual limit
Maxi Stocks and Shares ISA	£7,000
Mini Stocks and Shares ISA	£4,000	Shares ISA	£7,200
PEP	N/A

Selftrade account holders will be given further details, via their secure message boxes, as these changes draw nearer to implementation.

Please note that this information is based on our current understanding of HMRC Regulations and does not constitute advice or recommendations. We make no representations as to the completeness or accuracy of the information or of any opinions expressed. You are reminded that we provide an execution-only service and your decision to invest is made entirely at your discretion. We do not provide investment advice or manage investments. If you are unsure about the suitability of an investment, you should seek advice from an independent financial adviser.