How to Buy a Maxi ISA

Introduced in April 1999 to encourage U.K. citizens to save, a maxi ISA is a special individual savings account in which you can invest up to £7000 in a tax year. You can have only one maxi ISA, and split your investments in cash (up to £3000) as well as stocks and shares with the same ISA provider. Thanks to the special tax advantages of a maxi ISA, your investments are free of both income tax and capital gains tax.

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. Select your maxi ISA provider with care. You can get an ISA from banks and building societies, national savings and investments, financial advisers, supermarkets and retailers. Whether you invest wholly in stocks and shares or partly in cash, it has to be with the same provider.

2. Read the fine print and check the offered features like rates, bonuses, notice periods, penalties, “ready-made” investment funds, fund search tools and trading tools.

3. Open your account with your maxi ISA provider and provide the relevant personal and financial details.

4. Pay the required minimum amount of balance into your account with debit card or share transfer.

5. Study the market and check the best-buy tables in Moneywise. You can find the latest interest rates at websites like Moneyfacts and Interactive Investor. Create a shortlist of options that meet your investment priorities.

6. Go for "ready-made" investments vetted by your maxi ISA provider, for stakeholders ISA that abide to government rules or rope in an independent financial adviser to help with your investment decisions. Unless you are pretty savvy about stocks and shares, it is less of a hassle to have a Fund Manager look after your investments for you.

Tips & Warnings

• You must reside in the U.K. in order to buy a maxi ISA.
• You can invest in authorized unit trusts, investment trusts, open-ended investment companies, gilts and shares from all over the world. There are no geographical restrictions.
• Pick less volatile shares, reduce risk through diversification.
• Check the Institute of Financial Planning and Unbiased websites to find an independent financial adviser.
• You cannot invest in a maxi ISA if you are investing in a mini ISA that year.
• If you want to change Fund Managers, ask the new one to arrange the transfer and inform you about the charge, if any, for transferring. Follow the proper transfer procedure or your ISA investments can lose all tax immunity.
• Don’t invest more than £7000 in a maxi ISA in a year or your investment can lose its tax-free status.

Resources

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