How to maximise your ISAs
Individual Savings Accounts, also known as ISAs, are brilliant methods of tax-efficient saving. With the new tax year starting in April, early next year is an ideal time to look at your existing ISAs and make sure you are making the most of your money and your yearly ISA allowance. Whether you want to build a nest egg for the future, or simply make sure that your existing savings are working hard for you, we’ve put together this guide to help you maximise your existing ISAs.
You can save or invest tax-free
In short, an ISA is a savings account you don’t pay tax on, making it a great way to save, from short-term saving to retirement planning. 2015 was a ground-breaking year for ISAs – the rules were relaxed, giving people the ability to save more through greater flexibility and bigger tax breaks.
In 2019, the ISA allowance is being held at £20,000 but this is still a substantial amount to save. You can save all or some of that allowance into cash or investments. However, the allowance for Junior ISAs is changing, increasing from £4,128 to £4,260 on 6 April 2018.
There is flexibility in the way you invest
There is plenty of choice when you’re saving into an ISA – this might seem complicated at first, but it’s actually a straightforward way of saving.
One popular type of ISA is a stocks and shares ISA. Given that with Cash ISA’s you rarely are able to obtain an interest rate higher than 1% – with inflation nearing and the true value of that money being eroded, you may want to look at a stocks and shares ISA. The benefits of this type of ISA include there being no capital gains tax on profits, no tax on the interest earned and no tax on dividend income.
Stocks and shares ISAs are relatively simple to understand, but do be aware there is an element of risk, as your investment can be affected by fluctuations in the stock market. This means you may get back less than you invest, which is why it is always best to speak to an adviser.
Tips for making the most of your ISAs:
1. The earlier you save, the better
The sooner you start saving into a stocks and shares ISA, the sooner you can benefit from your investment as it grows. Here at Wellesley we can provide advice on the best ISA for you, and we can help to monitor your portfolio’s progress over time.
2. Loyalty isn’t always the best policy
You don’t have to leave your hard-earned money sitting in a cash ISA with a less-competitive rate – to maximise your savings we recommend transferring some or all of your ISA balances to a better account if one becomes available. Here at Wellesley we highly recommend stocks and shares ISAs as they offer the potential of better returns and the ability to diversify your portfolio.
3. Don’t withdraw your pot
Remember that you can move your money from ISA to ISA using the bank’s transfer-in service – do not withdraw your money to pay it into the new account as you’ll lose the tax-free status on the cash.
For more information
If you have a question about ISAs or would like more information about our services, please contact Wellesley Wealth Advisory on 01444 848508 or via email at email@example.com.