April 3, 2010


Britain goes Isa crazy: In an ironic twist, the recession caused millions of families to reassess the need to put money aside in an Isa. (Harry Wallop, 03 Apr 2010, Daily Telegraph)

Equity Isas are a way of owning stocks and shares. And here the tax-free element can make a big difference. Take your £1,000 lottery windfall: invest in some shares and say you were lucky and they doubled during the year. In normal circumstances, you would pay capital gains tax when you came to sell the shares.

With Isas you don't. On top of this, you should enjoy some income in dividends (though these do pay some tax). This is why it has been such a frenetic few weeks for Mr Corke.

Rebecca O'Keeffe, the head of investment at the stock broker Interactive Investor, said equity Isa sales had more than doubled compared with last year. Half a billion pounds is expected to pour into these equity Isas this weekend.

"It's just been incredibly busy. I think a lot of it is to do with the tax environment. It is becoming so much more onerous. And savers are looking to find ways of beating the taxman. Pensions have got a bad rap recently and shares seem a better bet."

The stock market has always been a gamble. One that has, over time, beaten all other forms of investment, but a gamble nonetheless. For now, investors are betting on the continuing return to health of UK PLC. For a brief time in October 2008, when capitalism itself looked under threat, the stock market kept on falling. But since then, with bumps along the way, it has recovered.

Part of this has been down to the surprising resilience of many British companies, which have slashed costs and found ways of making money overseas –the weak pound has helped the likes of BP, Glaxo and Tesco, who now do much of their business outside the UK.

Profits have improved and, in turn, their share prices have increased. The FTSE 100 index of leading shares has jumped from its 3,512 low to 5,672 this week.

Unlike the old days, when people would own shares in redoubtable British firms (Pig Improvement Company was my favourite), an increasing number are buying funds that are, in essence, a basket of international shares.

You think the Chinese railway boom has a long way to run? You can find an investment trust without going to the Shanghai stock exchange.

Statistics from the trade body Investment Management Association, suggest that February was the busiest February since 1959, when records began, with £1.88 billion of new money pumped into unit trusts and investment companies, many of which are baskets of gold, oil, steel, or Indian pharmaceutical shares.

After Monday night, a new tax year starts again, and stock brokers expect a new wave of money will pour into shares. When Mr Corke goes home, a colleague will take his place to take money in the early hours of Tuesday morning. That's because the maximum amount investors can put in an Isa in a single year will increase from £7,200 to £10,200.

Posted by Orrin Judd at April 3, 2010 6:34 AM
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