Act now to secure ISA tax benefits

Time is running out for anyone who has not yet used their annual Individual Savings Account (ISA) allowance.

Every individual can invest up to £20,000 each tax year. The 2020-21 tax year ends on April 5, less than a fortnight away, and any unused portion after this date can’t be carried over and will be lost.

The attraction is evident, particularly to the many hundreds of people who have become ISA millionaires. That group has an average age of around 70 and is reaping the benefits of regular investing since ISAs were launched in 1999.

However, before plunging in and committing your savings, whether it is the full amount or a smaller sum that you are able to lock away, it’s important to consider all of the options.

The simplest is a cash ISA. This is a savings account that pays interest tax free. At current low rates, that is largely irrelevant as savers can earn up to £1,000 (less for higher rate taxpayers) in a traditional bank account in any case, and they may pay more than an ISA.

The alternative is a stocks and shares ISA, which invests in shares, bonds, and investment funds. The performance of this type of fund depends on movements in stock markets, and all ISAs will not deliver the same returns, so you need to consider factors such as risk and the nature of the companies in which the ISA invests.

As with any form of investment, it is important to seek independent financial advice. In Chester, Hartey Wealth Management is a trusted source of reliable help.

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