Making the most of your ISA allowance

Individual Savings Accounts (or ISAs as they are more commonly known) were introduced by the government on 6 April 1999 to encourage people to save.

Individual Savings Accounts benefit from a favourable tax status, which means that all growth and income within an ISA is free of UK Income Tax and Capital Gains Tax. In total, there are 4 adult ISAs: Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs.

Like any good thing, there is a limit to the amount you can put into an ISA. For the 2019/2020 tax year, you can save or invest up to £20,000, £4,000 of which you can put into a Lifetime ISA. This is known as your ISA allowance.

Since 2014, the rules on splitting money between different types of ISAs have been relaxed. You can now pay the full £20,000 into a single type of Individual Savings Account (excluding the Lifetime ISA), or a combination of them all. However, it is important to note that you cannot pay into more than one of the same type of ISA within the same tax year. For example, you cannot pay into two different Stocks & Shares ISAs during the same tax year.

Why should you make the most of your ISA allowance?

Well firstly, by making the most of your ISA allowance, you get to keep more of your money. Paying tax on your savings can erode the value and eventually impact how much you get to keep. In addition to this, the Lifetime ISA provides a Government bonus of 25% to your savings, up to a maximum of £1,000 per year.

Secondly, any unused Individual Savings Accounts allowance will be lost if you don’t take full advantage of this before the end of the tax year. More importantly, by ignoring your allowance, you could be waving goodbye to potential growth and gains. So, make sure you make the most of it.

Making the most of your Individual Savings Accounts allowance is often quick, simple and most importantly, beneficial to your savings.

As you can see in this blog, there are many options. Therefore, if you would like further information on Individual Savings Accounts please get in touch with me. I am based at our Colchester office on 01206 217329 or trey.vella@birkettlong.co.uk.