What you need to know about ISAs in 2019/2020

The rules around Individual Savings Accounts (or ISAs) change on a regular basis and the popularity of the different types of ISA is often determined by where savers think the most competitive place to put their hard earned money is.

ISAs are an excellent way to save because of their tax efficiency. You don’t pay income tax or capital gains tax on the returns and you can withdraw your savings whenever you wish as a tax free lump sum. Because of their tax efficiency, there are set limits on how much you can save using ISAs.

The 2019/2020 tax year isn’t an ordinary year for ISAs because the main annual allowance of £20,000 remains the same. This means that the ISA limit hasn’t increased since 6th April 2017.

Not all ISAs have the same allowance. For Help to Buy ISAs, you can only save a maximum of £200 a month, on top of an initial deposit of £1,200. Lifetime ISAs (LISAs) have a maximum yearly allowance of £4,368, on top of which you profit from a government top-up of 25% of your contributions.

One ISA allowance that is increasing (a little!) is the Junior ISA, increasing from £4,260 to £4,368. This means that family members and other individuals can contribute slightly more to a child’s future, in a savings account that can only be accessed when they reach 18. Junior ISAs are quickly gaining in popularity, with around 907,000 such accounts subscribed to in the tax year 2017/2018. Brilliant news for the youngest generation!

Stocks and Shares ISAs are also gaining more popularity, with a rise of almost 250,000 in the last tax year. In general, though, the number of adult ISAs subscribed to in the last year fell from 11.1 million in 2016/2017 to 10.8 million in 2017/2018.

For investors with Stocks and Shares ISAs, Brexit uncertainty has understandably created cause for concern. In this environment, the best course of action could be to make sure that your investments are properly diversified across a wide variety of asset classes both in the UK and overseas.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

If you have any questions around this topic, please feel free to get in touch with us directly on 01789 263888 or email hello@charterswealth.co.uk.