Why it's still worth investing in an Isa

Strategy: Why it's still worth investing in an Isa - at Moneyweek.co.uk - the best of the week's international financial media.

Remember Isas? "Only a few years ago it seems that having one was practically compulsory," says Saga. In the late 1990s as shares soared it was reasonable for investors to think their capital gains would outrun their capital gains allowance (currently £7,900). Using a maxi-Isa wrapper let you invest up to £7,000 a year in equities free of capital gains tax, which seemed like a dream come true. Isas looked good for income investors, too. Holders of equity Isas got a 10% dividend tax credit from the Government. If you hold shares outside an Isa, 10% of your dividend income is automatically taken in tax - but inside an Isa, it was all yours.

Not any more. Gordon Brown changed the rules and last year you stopped getting that 10% back. Now he keeps it instead. And given that the days of automatic capital gains are long gone, it's no wonder our love affair with Isas is over. The latest figures show net Isa sales were £37.4m in October, an improvement on September's figure of £23.5m, but some 83% down on the same time last year, and a far cry from the £900m a month at the height of the bubble in 2000. But have Isas really outlived their usefulness? Absolutely not, says Alison Steed in The Daily Telegraph. There are still advantages. In November, the Chancellor announced that Isa allowances will not now be cut until 2009 at the earliest. For the foreseeable future, therefore, you can still invest up to £7,000 a year free of capital gains tax. And although the odds of big gains from your share holdings have fallen, in the long term you will be grateful for the concession.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.