Are you using your ISA allowance?
Most people don’t.
Which – as business owners, working hard for every penny of profit we create – really IS missing a trick!
The tax year end is fast approaching, on 5th April.
If you don’t use your ISA allowance before then, you’ll lose it.
And once it’s gone…it’s gone (you can’t just double up what you put in next year).
So here’s how you can use ISAs to your advantage, to make your money work hardest for you!
In a nutshell:
- You can save up to £20,000 per year, per person.
- Take your money out at any point (it’s not like a pension, where you have to wait until you’re 55).
- The income is tax free, when you do take it.
- And you don’t pay tax on any dividends you receive from it.
But which type of ISA to go for?
#1. Cash ISAs are dead – or should be!
Low interest rates = great for borrowers; terrible for savers.
Cash ISAs were a great place to put your money when interest rates were higher and you could get 3-5% tax free interest per year on them.
But now that interest rates are at such a low rate, there’s no point putting money there when you’d often get more interest in a current account.
Plus now, you don’t pay tax on the interest up to £1,000 a year on normal savings accounts. At 0.1% interest, this means you’d need over £1million in your savings account to start paying tax on the interest!
So Cash ISAs really are pretty much redundant.
But there are other ISAs that can be very useful.
#2. Stocks and Shares ISA
This works in the same way you’d do with your pension.
Which means they’re great as part of flexible retirement planning!
Modern retirement planning isn’t just about pensions.
There are loads of options, to make sure you have money available when you need it, in a way that makes sense to you.
With a Stocks and Shares ISA:
- You don’t need to wait until you’re 55 (unlike a pension);
- The income is tax free when you take it (unlike a pension);
- And it can be in the same type of fund as your pension, to benefit from the same rate of growth.
You can invest in a fund that is a mixture of stocks and shares and lower risk assets – so you get the potential for growing your money, without taking more risk than you feel comfortable with.
Stocks and Shares ISAs are available from a range of providers. There are loads of funds to choose from, all having different risk / reward profiles.
Some are actively managed, some are passive trackers and it can all get a bit confusing.
So if you’d like to explore your options, just click here now to book a (free) call and we can chat through your next steps! https://peacetogetherbookings.as.me/initial
#3. Junior ISAs
With a Junior ISA, you can save £4,368 a year for a child under 18 – in either a Cash ISA or a Stocks and Shares format as above.
But just be aware that they get full access when they turn 18.
And the money is theirs to spend however they choose!
#4. Lifetime ISA
You can choose a Lifetime ISA if you’re under 40 (they’re only available to people aged 18-39).
They allow you to save up to £4,000 each year and get a 25% bonus annually – which counts towards your overall £20,000 ISA allowance limit.
You can use this money to buy your first home or save for your retirement (no earlier than age 60).
If you take the money out for anything else, there is a penalty charge to recover the 25% government bonus paid out to you.
Which may seem a bad thing on first reading! But can get you a great return and ringfence your money, if you don’t want to be tempted to dip into it and have more accessible savings in other places.
So that’s a very brief overview of ISAs!
There’s still time to get yours sorted before the 5th April deadline, so you don’t lose your allowance.
To find out more about the right option for you, just book a quick call now and we can chat through your next steps! https://peacetogetherbookings.as.me/initial
Until next time,
Claire
