February 16, 2023
Don’t forget to use your 2022/23 tax-efficient ISA allowance before it disappears in 5 April. If you’re not sure about ISAs and what to do about them, here’s our round-up of the questions we’re most commonly asked about ISAs.
ISAs (individual savings accounts) are a particularly tax -efficient way of saving for the future – and they can be extremely simple.
Cash ISAs operate like a normal deposit account – but you pay no tax on the interest that you earn.
Stocks & Shares ISAs allow you to invest in equities, bonds or commercial property without paying personal tax on your proceeds.
There’s an annual tax-free allowance for putting money into an ISA of £20,000 for the 2022/23 tax year. Any unused ISA allowance will not be rolled over into the new tax year. When the new tax year begins, on 6 April, if you haven’t used all of your or your children’s (see Junior ISA below) ISA allowances from the previous tax year, they will be lost forever.
Yes, but you have a total tax-efficient allowance of £20,000 for the tax year 2022/23. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Lifetime ISAs, Innovative Finance ISA, or any combination) cannot exceed £20,000.
However, you do have the flexibility to split your tax-efficient allowance across as many ISAs and ISA types as you wish.
It depends. Some ISAs may tie your money up for a period of time. However, others are flexible. If you’re after flexibility, variable rate Cash ISAs don’t tend to have a minimum commitment. This means you can keep your money in one of these ISAs for as long – or as short – a time as you like. This type of ISA also allows you to take some of the money out of the ISA and put it back in without affecting its tax-efficient status.
Fixed-rate Cash ISAs will typically require you to tie your money up for a set amount of time. If you decide to cut the term short, you usually have to pay a penalty. But ISAs that tie your money up for longer do tend to have higher interest rates.
Stocks & Shares ISAs don’t usually have a minimum commitment, so you can take your money out at any point.
(As with all investing, remember that it’s recommended that you invest your money for at least five years – more if possible.)
If you’re aged between 18 and 39 you could open a Lifetime ISA. You’re allowed to put in up to £4,000 each year until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Yes. A Junior ISA is a savings and investment vehicle for children up to the age of 18. It is a tax-efficient way to save or invest for their future, as it’s free from any Income Tax, tax on dividends and Capital Gains Tax on the proceeds. The Junior ISA subscription limit is £9,000 for the tax year 2022/23.
Yes you can, and you won’t lose the tax-efficient status. Many previously attractive savings accounts may cease to have a good rate of interest, and naturally some Stocks & Shares ISAs don’t perform as well as investors would have hoped. Consolidating your ISAs may also substantially reduce your paperwork, and we’ll be happy to talk you through your options.
You can transfer an existing ISA from one provider to another at any time as long as the product terms and conditions allow it.
However, if you want to transfer money you’ve invested in an ISA during the current tax year, you must transfer all of it. For money you invested in previous years, you can choose to transfer all or part of your savings.
ISAs are one of the most straightforward ways to achieve tax-efficient gains. There’s still time to
invest up to £20,000 this tax year in an ISA (£40,000 if you’re a married couple/in a civil partnership), and put another £9,000 away tax-free in a Junior ISA if you have children or grandchildren.
If you’d like to find out more, or talk about consolidation existing ISAs, please get in touch.
The value of your investments can go down as well as up and you may get back less than you invested.
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