How to Buy a Mini ISA

Mini ISAs are part of the U.K. government’s individual savings account scheme and have special tax advantages; there is no income tax and capital gains tax on the investments you place in the ISA. You have an investment allowance of £7000 in a year to invest in up to 2 mini ISAs, one for your cash allowance (up to £3000) and one for shares and stock investments (£4000). You can choose different providers for each ISA if you want.

Difficulty: Moderate

Instructions

Things You'll Need:

• Internet
• Phone
• Debit card
• U.K. bank account
• Permanent national insurance number
• U.K. citizenship
• Employment details
• Valid email address

1. Consider your investment priorities, whether you are looking for long term or short term investments. Stock and share ISA is great for long term investments and cash ISA is suitable for short term investment.

2. Shop around and compare the terms and conditions of different mini ISA providers. Find out if you can operate your account via phone, post, Internet and branch. Ask if they allow or accept transfers from other accounts.

3. Check if they offer a "ready-made" selection of carefully evaluated investments or allow you to make your own selections.

4. Check features like bonuses, fixed interest rates, notice periods and penalties for cash ISA.

5. Consider your appetite for risk and the amount you can afford to invest for stock and share ISA. Research the sector or sectors you want to invest in, and get advice from an independent financial adviser if required. You can invest in authorized unit trusts, investment trusts, open-ended investment companies, gilts and shares.

6. Choose your mini ISA provider or providers and open your account by filling out an online or regular application form and providing your bank and income details.

7. Complete your online application and activate your account.

8. Fund your account by paying cash by debit card or by transferring existing investments.

9. Start investing. Diversify your investments to reduce risk. Review your portfolio at least once a year and if your rate is not competitive, transfer to a different provider. You can only transfer to another ISA of the same type.

Tips & Warnings

• You must be a U.K. resident and 16 or over to open a cash ISA account and 18 or over to open a stocks and shares ISA.
• You can own an ISA yourself, you can’t hold it jointly with someone or on behalf of anybody.
• You can withdraw money at any time without losing tax benefits.
• Once you have invested your maximum amount in the mini ISA account, you can’t invest anymore even if you withdraw some money.
• You cannot simultaneously invest in both mini ISA and maxi ISA. If you do, your secondary investment is invalidated and you forfeit the tax advantages.

Resources

• Interactive investor
• The institute of financial planning
• Unbiased--independent financial adviser