With the end of the tax year fast approaching, time is running out to make the most of your annual ISA allowance. Any unused allowance can’t be carried forward into the next tax year
Why should you use your ISA allowance?
An ISA effectively shelters your investments or savings from tax. You pay no Income Tax on the interest or dividends you earn within an ISA, and any profits from investments are free of Capital Gains Tax (CGT).
The ISA has long been a pillar of long-term financial planning thanks to its valuable tax advantages, and is arguably now even more precious given the recent increases to the rates of CGT announced in the Autumn Budget.
You don’t need to include ISA investments on your tax return, which can make managing your finances easier, and allows you to make investment choices based solely on their potential, with no need to factor in any tax implications.
How and where can I use the allowance?
You can save or invest up to £20,000 in total each year. Your annual allowance for the 2024/25 tax year will expire at midnight on April 5 2025.
The money can be invested across eligible ISAs, for example cash, stocks and shares and Lifetime ISAs. There are no limits to the number of ISAs you can have, provided you don’t exceed the overall annual allowance.
Stocks and shares ISAs could deliver a higher return over the longer term than cash ISAs. However, there is a risk the value of your investments could fall – especially in the short term.
A Lifetime ISA, which can form up to £4,000 of the £20,000 ISA allowance, is available to people aged between 18 and 40 who are saving for retirement or a house deposit. The government will add a 25% bonus to contributions, up to £1,000 each year. You can continue to make contributions into a Lifetime ISA up to the age of 50.
For those wanting to give their children a head start, Junior ISAs are a popular way for friends and family and build up tax-free savings and investments, with an annual investment limit of £9,000 per child. Withdrawals are possible from when the child turns 18.
It’s up to you how you choose to make use of your allowance. If you have funds available, a lump-sum deposit is a quick and easy way to maximise your allowance. Alternatively, setting up a recurring payment can help you build towards the full amount. If you have ISAs with multiple providers, transferring them can simplify your finances and ensure you’re making the most of your allowance.
Here to help
If you’d like to have a chat about the best approach to maximise your own ISA allowance, we’re here to help. Contact us on 0333 241 3350 or email info@richmondhousewm.co.uk
The information available through Nugenis is for your general information. In particular, the information does not constitute any form of advice or recommendation and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be taken before making any such decision. Past performance is not necessarily a guide to future performance. The value of investments may go down as well as up and you may not get back the money you originally invested.
Richmond House Wealth Management is a trading name of IWP Financial Planning Limited which is authorised and regulated by the Financial Conduct Authority. Financial Services Register:441359 at register.fca.org.uk. Registered Office: Blythe Lea Barn Mill Farm, Packington Park, Meriden, Warwickshire, CV7 7HE. Company Number 04138186.