Allowances

As I am writing this article what I term as our ‘mad season’ is just about to start. This is when we have many requests from individuals wishing to utilise different allowances before the end of the tax year. One of these being their ISA allowance.

So what is an ISA?
There are 5 main types: Cash, Stocks and Share, Help to buy ISA (which is now closed to new investors), Lifetime and Innovative Finance. You can invest up to £20,000 into one ISA or a mixture, apart from a Lifetime ISA where you are limited to £4,000 pa, however you can invest the remaining £16,000 into other ISAs.

Here’s a simple definition of the different types of ISA:

Cash ISAs – Interest on deposit is taxable above the personal saving allowance which is
dependent on your tax rate Cash ISAs are not subject to tax.

Help to Buy ISAs – You could open before the 30th November 2019 (for first time buyers only). The state adds a bonus (maximum £3,000) of 25% of the amount you have saved, when this is used to purchase a property that meets certain criteria.

Innovative Finance ISAs – This covers a multitude of products and it means that any interest you get from lending money to other people or companies is not taxed (Peer to Peer lending).

Lifetime ISAs – This is open to individuals between the ages of 18 and 40 years old. You can save up to £4,000 per year in these and the state will give you a 25% bonus on each contribution, up to the age of 50. The purpose is to save for retirement or your first house, if you withdraw funds for any other purpose you will be penalised and this cost may be more then the bonus you have received.

Stocks and Share ISAs – This is used to invest into a range of investments including cash, stocks and shares and pooled investments tax efficiently.

So should you be considering one of these prior to the end of the tax year and if so which one?
Everyone’s situation is different and this is why we would recommend you seek advice.

• This is based on our understanding of current taxation, legislation and HM Revenue & Customs practice and limits, all of which are liable to change without notice.
• The value of your investment can go down as well as up and you may get back less than the amount invested.
• The Financial Conduct Authority does not regulate taxation and trust advice.