The benefits of ISAs

With changes to regulations in April 2004, you may be wondering what benefits ISAs and PEPs still offer:

No income tax to pay
This is particularly valuable if you're a higher-rate taxpayer. For example, if as a higher-rate taxpayer you receive £100 in dividends on an investment that is not held in an ISA, you have to pay an extra £25 in income tax. However, if your investment is held in an ISA, you won't have to pay any extra tax at all. This may be worth thinking about even if you're not currently paying higher-rate tax at the moment, as you may move into the upper tax bracket in the future.

No Capital Gains Tax to pay
You don't have to pay any Capital Gains Tax on your PEPs and ISAs. It's reassuring to know that no matter how much you invest in the future or how successful your investments are, you will not have any of this tax to pay.

Hold bonds in ISAs and PEPs and receive a tax-free income
You can continue to hold bonds in ISAs and PEPs and receive a tax-free income. Alternatively, you can reinvest your income and use your investment as a way to achieve long-term growth. Even if you don't want to invest in bonds at the moment, you may want to move money from equity funds into bonds in the future - perhaps when you need to take an income from your investments or if you want to reduce the level of risk in your portfolio as you near retirement.

You don't have to mention ISAs and PEPs on your tax return
If you have a range of fund holdings, listing them all on your tax return can be a time-consuming task.

Unit Trusts

Unit trusts, investments trusts, OEICS, shares, gilts and National Savings are all other useful investment products to invest for the medium to long term.

The value of an investment can go down as well as up and cannot be guaranteed.

You should remember that the capital value of a bank or building society deposit account is secure.