The deadline to maximise your ISA allowance this year is 5 April. Are you close to your £20,000 maximum? If not, it’s time to make use of the tax break to reduce the amount of tax you pay on your hard-earned money. You can’t carry forward any unused allowance – so make sure you use it!
This does not constitute advice and advice should be sought in all instances before acting on it.
Remember, you can split your allowance across a variety of ISA types in whatever amount you wish.
Here is a rundown of the various types to choose from:
Any UK resident over the age of 18 (or 16 for CASH ISAs only) can open up one kind of ISA each tax year. These are helpful for short-term savings goals as they don’t depend on the stock market but, with low interest rates and high inflation, your savings won’t be able to keep up.
Stocks & Shares ISA
A Stocks & Shares ISA is a tax-efficient investment that lets you invest your money in shares, government bonds (gilts) and property and not worry about paying any capital gains tax or income tax on the profits. These come with varying levels of risk but are good for longer term goals because of the potential to outperform Cash ISAs in the medium to long-term.
Innovative Finance ISA
Innovative Finance ISAs let you lend your money through peer-to-peer lending platforms tax efficiently. Interest rates are usually more enticing than Cash ISA rates, but this kind of investing is higher risk as this lending is unregulated and not protected by the Financial Services Compensation Scheme (FSCS).
You can open up a Lifetime ISA (LISA) at any point from age 18 to 39. LISAs help you save for something big for later on in life, like your first home. With this kind of ISA, you can simply hold cash or you can invest it just like with a Stocks & Shares ISA. Your maximum allowance for a LISA is £4,000 each year – up to and including the day before your 50th birthday.
Bonus: You’ll get a 25% bonus from the government on your contributions – that’s £1 for every £4 you put in up to £1,000 a year. Don’t forget that withdrawals will incur a charge of 25% for any reason other than buying your first home, you reach age 60, or if you become terminally ill.
With a Junior ISA (JISA), you can have both a Cash and Stocks & Shares ISA account for a child. The annual allowance of a Junior ISA is £9,000 for the 2021/22 tax year. A parent or guardian is required to open an account, but once it’s set up, anyone can contribute. Savings are only available for withdrawal once the child reaches 18 years of age.
Maximise your allowance
Individual Savings Accounts are a great way to get a bigger return on your savings. For more information about how Dental & Medical Financial Services can help you maximise your ISA allowance, schedule a consultation today.
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