Make use of your ISA allowances – Don’t miss the ISA Deadline
As always, as the end of the tax year approaches, we like to remind our clients about the various end of tax year planning opportunities available.
Outside of pensions, ISAs are the principal method of tax favoured investing with exemption from personal income tax or capital gains. Currently, the annual allowance is £20,000 per person and it is not dependent on anything (unlike your pension annual allowance), so, no matter your income tax status, you can still get the full £20,000 each year!
You have until 5th April 2024 to use as much of your tax-efficient allowances as you can – although we highly recommend you act sooner to ensure the deadline is met. There is no carry-forward with ISA allowances, so it is ‘use it or lose it’ if you do not invest before tax year end. If you have taken money from your ISA by way of income or capital since 6th April 2023, you may also have the opportunity to replace these withdrawals.
Contributing to your ISA means you invest your savings within a tax-exempt tax wrapper. Rather than keeping your savings in cash, you can invest in the very same assets you have in your pension, giving you access to potential returns well above that which is offered by standard cash accounts over the longer term. There is, of course, lots of flexibility with how you can invest your ISA portfolio and you could adopt a different strategy depending on your objectives and goals.
Another important point is capital gains tax allowance is reducing again. The 2023/24 allowance for capital gains tax is currently £6,000 but it is going down to £3,000 as of 6th April 2024. The best way to make the most of your allowance is to use as much of it as you can because the money in your ISA, as well as any returns and income it makes, is free from capital gains and income tax.
If you have children or Grandchildren you may want to consider Junior ISAs. These have an annual allowance of £9,000 per child and can be funded by parents and grandparents as part of a longer-term strategy to provide resources and financial security beyond their 18th birthday. They can also form part of a gifting programme if you are looking to mitigate inheritance tax.
If you want to fund your ISA or discuss any of the other points raised, please contact your Prosperis adviser on 01423 223640 or advice@prosperis.co.uk if you require any further information.