Maximise Your Tax-Free Savings
An ISA (Individual Savings Account) is a tax-efficient way to save or invest, offering the potential for growth or income without paying tax on the returns. Whether you're looking for low-risk savings or growth through investments, ISAs provide flexibility to suit your needs.
For the current tax year, the ISA allowance is £20,000, meaning you can save or invest up to this amount tax-free. You can choose different types of ISAs but the most popular are:
- Cash ISA: A safe way to save with no tax on the interest earned.
- Stocks & Shares ISA: Offers the potential for higher returns through investments in funds, shares, and bonds, but comes with risk.
You can split your allowance between a Cash ISA and a Stocks & Shares ISA, depending on your goals. For example:
- £10,000 in a Cash ISA and £10,000 in a Stocks & Shares ISA
- £20,000 entirely in a Cash ISA or entirely in a Stocks & Shares ISA
Types of ISAs
- Cash ISA: Ideal for savers who want low-risk returns. Your interest is tax-free, and your capital is protected.
- Stocks & Shares ISA: For those looking to invest in a variety of assets (shares, bonds, funds) with the potential for higher returns. However, investments can go down as well as up.
- Lifetime ISA: Aimed at savers aged 18 to 40 at commencement, allowing up to £4,000 in contributions annually, with a government bonus of 25% (up to £1,000 per year). It’s designed for first-time home buyers or retirement savings.
- Innovative Finance ISA: A way to invest in peer-to-peer lending, offering potentially higher returns but with increased risk.
- Junior ISA: Designed for individuals under 18, the Junior ISA allows up to £9,000 to be saved or invested per year, either in a cash ISA or investment ISA. The account must be opened by a parent or guardian, but once opened, anyone can contribute. The funds automatically transfer to the child on their 18th birthday.
Transferring ISAs
If you're considering switching between ISA types, you can transfer a Cash ISA to a Stocks & Shares ISA, or vice versa, depending on your needs and risk appetite. You should seek financial advice before doing so.
Important ISA Rules
- You can contribute to multiple Cash ISA and Stocks & Shares ISA per tax year as long as you don’t exceed the investment limit.
- Once you’ve reached your £20,000 limit, you can’t invest more until the next tax year. However, if your ISA is considered a flexi-ISA and you make a withdrawal, you can also replace that amount in the same tax year without affecting your investment limit.
- Lifetime ISA contributions are capped at £4,000 per year up to age 50, and these contributions count towards your overall £20,000 allowance.
How We Can Help
At P J McIlroy & Son, we provide independent advice on selecting the right ISA for your personal savings or investment goals. We’ll guide you through the process, ensuring you make the most of your annual ISA allowance.
To arrange an appointment with our Independent Financial Adviser, call us on 02820762353 or email us at ifa@pjmcilroy.co.uk. We’ll be happy to discuss your options and help tailor your ISA strategy to your needs.
