Summary of changes and Questions & Answers

From 6 April 2008

• The annual ISA investment allowance is £7,200
• Up to £3,600 of that allowance can be saved in cash with one provider
• The remainder of the £7,200 can be invested in stocks and shares with either the same or a different provider
• Customers can invest in two separate ISAs each tax year; a cash ISA and a Stocks and Shares ISA
• Mini and Maxi ISAs no longer exist
• Mini Cash ISAs, TESSA-only ISAs (TOISAs) and the cash component of a Maxi ISA automatically become cash ISAs
• Mini Stocks and Shares ISAs and the stocks and shares component of a Maxi ISA automatically become Stocks and Shares ISAs
• All PEPs (Personal Equity Plans) automatically become Stocks and Shares ISAs
• Money saved in a cash ISA can be transferred to a Stocks and Shares ISA (so long as you are aged 18 or over).

What are my ISA investment options?
From 6 April 2008 you can invest in one cash ISA and one Stocks and Shares ISA each tax year.

The annual ISA investment allowance has now risen to £7,200 per tax year. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in a Stocks and Shares ISA with either the same or another provider.

For example, you can choose to save £1,000 in a cash ISA with one provider and £6,200 in a Stocks and Shares ISA with a different provider.

If you do not save into a cash ISA you may invest the full £7,200 into a Stocks and Shares ISA.

What about PEPs?
All PEP accounts automatically become Stocks and Shares ISAs. You will be able to invest in this reclassified PEP, as long as you are still eligible to subscribe to an ISA and you don't subscribe to another Stocks and Shares ISA during the same tax year. A new application form will be required for the new tax year.

What about existing ISAs?
Mini Cash ISAs, TOISAs and the cash component of a Maxi ISA are reclassified as 'cash ISAs'.

Mini Stocks and Shares ISAs and the stocks and shares component of a Maxi ISA are reclassified as 'Stocks and Shares ISAs'.

How much can I transfer from my cash ISA to a Stocks and Shares ISA?
You can transfer some or all of the money you have saved in previous tax years without affecting your current tax years annual ISA investment allowance.

You are also able to transfer money saved in the current tax year. Such transfers must be the whole amount saved in that tax year in that cash ISA up to the day of the transfer.

If I transfer all of the current year cash ISA subscription to a Stocks and Shares ISA, can I make any further payments to my cash ISA later in the same tax year?
Yes - provided you haven't already used up your annual ISA investment allowance of £7,200.

When you transfer your current tax year's cash ISA subscription to a Stocks and Shares ISA it is as if that cash ISA subscription had never existed. Any money you subscribed to the cash ISA in the current tax year up to the date of transfer will be treated as if you had invested that money directly to the Stocks and Shares ISA.

For example, if you had saved £2,000 in a cash ISA during tax year 2008/09 and then transferred it to a Stocks and Shares ISA later in that tax year you would be able to make further investments totalling £5,200 in the year. You can either invest all of the £5,200 in a Stocks and Shares ISA or you could save up to £3,600 in a cash ISA or a combination of both.

How do I transfer the money in a previous Tax Year's cash ISA to a Stocks and Shares ISA?
Exactly the same way as you would transfer your ISA to another ISA provider.

You must not withdraw the money and invest it in your Stocks and Shares ISA yourself, as it will count towards your annual ISA investment allowance.

Can I also transfer the monies held in a TOISA to a Stocks and Shares ISA?
Yes you can. A TOISA is a cash ISA.

Can I transfer the monies invested in my Stocks and Shares ISA to a cash ISA?
No. The ISA rules are being changed to allow the transfer of monies saved in a cash ISA to a Stocks and Shares ISA but not vice versa.

Can I still transfer my existing Stocks and Shares ISA from previous Tax Years to another Stocks and Shares ISA provider?
Yes. The rules on transferring like-for-like ISAs between providers are not changing.

For example, you can still transfer your Stocks and Shares ISA held with one provider to a first direct Stocks and Shares ISA, without affecting your annual ISA investment allowance.

You must not withdraw your investments from a Stocks and Shares ISA and re-invest them in another Stocks and Shares ISA yourself, as it will count towards your annual ISA investment allowance.

For customers of first direct shares service only

Are there any new forms for me to sign if I want to continue paying in to an ISA?
first direct shares does not use continuous application forms, therefore a new Stocks and Shares ISA application form must be completed for each new tax year's subscription.

Do I have to merge my PEP investments with my Stocks and Shares ISA investments?
No, existing PEPs become Stocks and Shares ISAs, therefore it may result in you having two Stocks and Shares ISAs, but you have the choice to merge the two if you so wish.

Is there any benefit to merging my PEP investments with my Stocks and Shares ISA?
first direct shares charges a fee for each transaction undertaken within a Stocks and Shares ISA. Therefore if you hold the same investment within two separate Stocks and Shares ISAs and you wish to close your position in that particular stock, you will have to undertake two transactions, one in each of the Stocks and Shares ISAs. The same applies if you want to purchase stock in each of the ISAs. If you merge your Stocks and Shares ISA, only a single transaction fee would be required.

How do I merge my Stocks and Shares ISA, and how long does it take?
To arrange for your Stocks and Shares ISAs to be merged, simply call us on 08 456 100 105 after 6 April 2008. The merger process will take 3 working days, but may take longer if there are any outstanding transactions yet to settle such as purchases, sales and corporate actions. All transactions must be settled before the merger can be completed.

Will there be any changes to charges or tax once my first direct PEP becomes a first direct Stocks and Shares ISA?
Our charges will stay the same. However there is a difference between PEPs and Stocks and Shares ISAs in the way interest earned on uninvested cash is taxed.

For ISAs, a flat rate charge of 20% is deducted and paid to HM Revenue & Customs. For PEPs, interest is credited gross and each tax year investors may withdraw up to £180 of such interest without it being subject to a deduction for tax. As PEPs will be reclassified as Stocks and Shares ISAs from 6 April 2008, they will become subject to the ISA flat rate charge of 20% on any interest credited on or after that date.

Will the qualifying investments of the ISA be changed?
No. The qualifying investments rules of the ISA will not change, although as PEPs will be reclassified as Stocks and Shares ISAs they will have a slightly wider range of qualifying investments available to them under the new Regulations, but ISA managers are not obliged to offer these.

The range of investments permitted in the first direct Stocks and Shares ISA, including those that were formally first direct PEPs prior to 6 April 2008 is not changing.

What are the cut off times for new ISA applications and subscriptions for the 2007/2008 Tax Year?
Due to the new ISA/PEP Regulation changes, the first direct shares website will be unavailable from 9:30pm on Friday 4 April until 6:00am Sunday 6 April for these necessary updates to be implemented. Therefore if you wish to fund an existing 2007/2008 first direct Stocks and Shares ISA online, or apply for a new one, requests must be submitted by 9:30pm on Friday 4 April 2008.