Use of ISA Allowances Before end of Tax Year

Each year you are allowed to save or invest up to £20,000 in an Individual Savings Account (ISA). The tax year runs  from the 6th April  to the 5th April the following year . If you don’t use the full allowance, after this date it will be lost.

ISAs are a tax efficient way to invest your money because you don’t pay Income Tax on your interest, and don’t pay Capital Gains Tax on any profits. With the deadline date looming, you should check whether you have used your annual ISA allowance before you lose it.

Investing Using an ISA

The main difference between an ISA and any other savings account is that it offers tax-free interest payments, meaning that you get more for your money.

ISAs have many benefits including:

  • No income tax is payable on interest payments which are made by bond funds
  • No higher rate tax is payable on dividends
  • You do not pay Capital Gains Tax on any growth you may achieve
  • Income from an ISA doesn’t affect your personal allowance or age-related allowance
  • Your annual allowance starts afresh each new tax year
  • Stocks and Shares ISAs can help mitigate inflation

Having an ISA can also simplify your tax return, as you will likely not need to report the income and capital gains from your ISA on your annual tax return.

Types of ISA Accounts

There are various types of ISAs including cash ISAs, stocks and shares ISAs, innovative finance ISAs, and lifetime ISAs. Savers can deposit the full £20,000 into a cash, stocks and shares or innovative finance ISA, or any mix of the three types.

Lifetime ISAs are slightly different – as the allowance is capped at £4,000 per tax year.

It is worth noting that although there are no limits to how many ISA accounts you have, the amount that you deposit in  these accounts each year can be no more than £20,000.

Withdrawing Money from an ISA

You are allowed to withdraw money from your ISA and replace it, which will not count towards the ISA allowance. However, any replacements must be made in the same tax year as the withdrawal.

How We Can Help

Our expert team can help advise you on investing your money and how to manage your accounts. Contact us now to find out more.