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Maximising the ISA allowance when taking a percentage initial fee

If you request a percentage-based initial fee alongside an ISA contribution, it’s important to remember that the percentage you request will be deducted from the total contribution you send to Old Mutual Wealth.

The grossing up calculator is an easy way to calculate the amount that should be paid to Old Mutual Wealth, to maximise the ISA allowance. Simply enter the contribution amount and the initial fee you require, and the tool will calculate the amount that should be paid to Old Mutual Wealth to ensure the full ISA allowance is utilised.

PLEASE NOTE: This tool should not be used where an initial fee is being requested on a monetary basis. If requesting the fee as an amount of money you can simply add that initial fee to the maximum ISA subscription amount to ensure your clients ISA allowance is fully subscribed.

How to Maximise the ISA allowance

  • A client wishes to maximise their ISA allowance for the 2017/18 tax year by contributing £20,000.
  • The client’s adviser agrees with the client to take a 3% initial fee.
  • To ensure the ISA allowance is maximised the adviser should take the contribution amount of £20,000 and divide it by 100 minus the initial fee amount, in this case 100 – 3 (97), then multiply by 100. As an equation, (20,000/(100-97))*100=£20,618.56.
    The platform will then take the amount of £20,618.56 and deduct 3% of the figure as the adviser's initial fee, leaving £20,000 to be invested.

Avoid common pitfalls

  • It is a common occurrence for advisers to calculate 3% of the current ISA allowance as follows: £20,000 x 3% = £600 and to submit an application for £20,600 (£20,000 + £600). Then when Old Mutual Wealth is asked to pay a 3% initial fee, the adviser would receive a greater amount, in monetary terms, than he had intended to take or that the client believed he would take, This is because Old Mutual Wealth would deduct 3% of £20,600 (ie the payment received), equating to a fee of £618, and leaving an ISA subscription of only £19,982 short of the maximum ISA allowance.

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