Long live King ISA

Tony Harris at IFAs FreelancerMoney writes- Just ahead of today's pre-budget report, it now seems certain that the sword that has hung over the head of Individual Savings Accounts (ISAs) will be removed.

Since their introduction in 1999 16 million ISA accounts have been opened but their tax free status has not been safe beyond 2010.

At the 2006 PEP and ISA Managers Association Annual Conference Ed Balls, Economic Secretary to the Treasury announced that the government "will make the ISA a permanent feature of the savings landscape."

With the number of tax-breaks available to contractors becoming ever smaller it has never been more important to take advantage of the tax havens that remain. £215 billion has been sheltered away from the taxman's grasp in ISAs but our experience has shown that Contractors can sometimes overlook the opportunities provided.

At the very least Freelancers should exploit the fact that banks and other institutions will offer far better rates on cash ISAs than they will do on standard deposit accounts. Headline grabbing rates are used to entice savers into their branches so that they can then sell higher margin products but you can play them at their own game. The banks expect you to leave the money long term but some great rates can be exploited, even on instant access ISAs, so it makes a lot of sense to transfer funds held in low interest, taxable accounts elsewhere.

For funds that can be left for the medium to long term ignore cash and look at an investment backed ISA which should make far greater use of the tax shelter. To counter the uncertainty of fluctuating stock markets invest on a regular monthly basis and you make a virtue of any month on month dips in share prices by buying cheaply when prices are down.

For more information on ISAs and how you can benefit from the proposed budget changes visit ITContractor.com's ISA section.

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