Why April 5th matters for ISA investors

At this time of year, it’s normal for the financial pages of our newspapers to be full of reminders to use up tax allowances. The tax year ends in a matter of days, and while it’s possible to carry forward some unused allowances, others will be lost.

For example, pension contributions are more flexible than other forms of investment, such as Individual Savings Accounts (ISAs). The latter is particularly in focus right now, as time is running out to maximise the benefits.

There are three main tax advantages to investing in an ISA rather than any other fund or product. The first of these is that there is no tax to pay on profits made as a result of share price increases, whereas other investments have a maximum profit of £12,300 before the taxman takes a cut. The second benefit is on dividends paid by companies, which are also completely tax free in an ISA but otherwise have a ceiling of £2,000. The third benefit is gross interest on bonds and cash, which normally have limits, depending on whether the individual is a basic rate or higher rate taxpayer.

Anyone who has not yet used the full allowance can do so by April 5th, then invest a further £20,000 the following day or at any point in the ensuing year.

There are advantages and disadvantages to making payments monthly or as a lump sum. If you need independent financial advice in Chester, we at Hartey Wealth Management can help you weigh up your options.

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