At the start of the tax year in the UK, everyone over 16 has access to a new ISA allowance of £20,000. However, this allowance does not roll over so if you don’t use it within the tax year you lose it.
The new tax year starts on the 6th of April, so if you have any of your allowance left you need to use it up. For example, if you’ve only used £15,000 of your allowance this year, you need to use the other £5000 before the 5th of April or it’s gone. You won’t get £25,000 next year.
Your £20,000 allowance can be split up between different types of ISA e.g. a cash ISA and a stocks and shares ISA. But you cannot deposit money into two of the same type of account in the same tax year (e.g. two cash ISAs or two stocks and shares ISAs).
Once you have made the deposit and it’s safely tucked away in your ISA, you can keep it there, tax free, for as long as you want. Then once the new year starts, you can work on depositing another £20,000. You can deposit the full £20,000 at once if you’d like, or you can make smaller deposits throughout the tax year.
What kinds of ISA are there?
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A cash ISA is like a standard savings account, but you will never have to pay interest tax.
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A stocks and shares ISA allows you to invest your money in funds, bonds and shares in individual companies. There is always an element of risk involved with investing.
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An innovative finance ISA will use your money to lend to borrowers or businesses. You may have to wait to withdraw your money and it isn’t protected.
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A lifetime ISA is intended to help you pay for your first home or retirement.
What are the benefits of using an ISA?
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Tax benefits – by putting your money into an ISA, you do not have to pay any tax on it. Standard investments are potentially liable to Capital Gains Tax.
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Flexibility – depending on which ISA you choose, you could benefit from flexible access to your money.
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Variety – depending on which type of ISA you choose, you could benefit from a variety of investment options.
If you have any questions about your current ISAs or you’d like to look into setting one up, get in touch and we’ll be happy to help.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.