ISA 2020 Allowance – Use it or Lose it: Maximise your wealth creation – don’t miss the deadline!

Whatever you’re putting money aside for, there’s likely to be a role for Individual Saving Accounts, or ‘ISAs’. An ISA is a way of holding savings or investments without paying personal tax on interest received or on the growth of your investment.

Whether you’re a novice or an experienced saver, we can help you get the most from your 2019/20 ISA allowance.

TAX YEAR DEADLINE IS 5 APRIL 2020

Each year, you have an ISA allowance which, if fully utilised, can have a big impact over time. ISA allowances can’t be rolled over to the next tax year. If you don’t use your 2019/20 ISA allowance by 5 April 2020, it’ll be gone for good. For the 2019/20 tax year, the ISA allowance is £20,000.the ISA allowance across different types of ISA, but you can only add money to one ISA of each type in a tax year.

 TAX-EFFICIENT WRAPPER

ISAs are a very tax-efficient wrapper in which you can buy, hold and sell investments. For any ISA contributions to count for the current tax year, you must save or invest by 5 April.

Also, don’t forget that any unused ISA allowance can’t be rolled over into a subsequent tax year, so if you don’t use it, you’ve lost it forever. Even though you’ll receive a new allowance for the next tax year, you are not permitted to contribute anything towards a previous ISA.

TYPES OF ISA OPTIONS

  • Cash ISAs – these are savings accounts that are tax-free, with the maximum allowable contribution set at £20,000 in the current tax year
  • Junior ISAs – these are tax-free savings accounts in which under-18s can save or invest maximum contributions up to £4,368 in the current tax year
  • Stocks & Shares ISAs – these are investments that are classed as tax-efficient, with the maximum allowable contribution set at £20,000 in the current tax year
  • Innovative Finance ISAs – these are peer- to-peer lending investments that are classed as tax-efficient, with the maximum allowable contribution set at £20,000 in the current tax year. However, they are considered high risk, and it may not be possible to get your money out quickly. Some may not be protected by the Financial Services Compensation Scheme
  • Lifetime ISAs – these can be either classed as savings (tax-free) or investments (tax-efficient). You must be aged between 18 to 39, and the maximum allowable contribution is set at £4,000 in the current tax year
  • Help to Buy: ISAs – these were set up to help those saving for their first home and were only available to new savers until 30 November 2019. Existing savers can continue saving, although they must claim their government bonus by 1 December 2030.

KEY ELEMENTS

Goals, time horizon, risk and diversification are key elements to consider when saving and investing. You could put all the £20,000 into a Cash ISA, or invest it in a Stocks & Shares ISA or an Innovative Finance ISA. Alternatively, you could split your allowance between Cash ISAs, Stocks & Shares ISAs, Lifetime ISAs or Innovative Finance ISAs, depending on your specific situation and requirements.

If you are not sure what to invest in, you could temporarily hold your annual ISA allowance in cash in the short term and invest thereafter. However, cash is not good for the long term because inflation has the potential to erode its value.

TRANSFER INVESTMENTS

If you don’t have £20,000 in new money to invest, you could transfer investments outside a tax-efficient wrapper into an ISA.

ISAs can also be passed on death to a surviving spouse or registered civil partner. The surviving spouse is entitled to an additional, one-off ISA allowance, equal to the value of the deceased’s ISA holdings. This enables the surviving spouse to effectively re-shelter assets which were in a spouse’s ISA into an ISA in their own name.

WANT TO GET THE MOST FROM YOUR ISA ALLOWANCE?

ISAs enable savers and investors to build up the sums they need to meet financial goals, whether to supplement a retirement pot or a deposit for a home. However, if you don’t know how ISAs work and how to use them to manage your wealth, you won’t be able to take full advantage of their benefits. To find out more, or to discuss your options before the end of the current tax year, please contact us.

Who are Vizion Wealth?

Our approach to financial planning is simple, our clients are our number one priority and we ensure all our advice, strategies and services are tailored to the specific individual to best meet their longer term financial goals and aspirations. We understand that everyone is unique. We understand that wealth means different things to different people and each client will require a different strategy to build wealth, use and enjoy it during their lifetimes and to protect it for family and loved ones in the future.

All of us at Vizion Wealth are committed to our client’s financial success and would like to have an opportunity to review your individual wealth goals. To find out more, get in touch with us – we very much look forward to hearing from you.

[1] https://assets.publishing.service.gov. uk/government/uploads/system/uploads/ attachment_data/file/730110/Table_12_1.pdf

DISCLAIMER:

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES, OF AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS

WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

“The information contained in this article is intended solely for information purposes only and does not constitute advice.  While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Vizion Wealth is not responsible for any errors or omissions. In no event will Vizion Wealth be liable to the reader or anyone else for any decision made or action taken in reliance on the information provided in this article”.

Posted by James Blackham

James particularly enjoys building close relationships with all clients and helping people identify and fulfil their long term financial goals. A highly qualified Financial Planner working towards Chartered status and is also a Pension Transfer Specialist. James is also a partner of Vizion Wealth LLP.

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