Time Is Running Out For This Year’s ISA
Use It Or Lose IT - It's Your ISA
Deadline is approaching – if you haven’t used your ISA allowance by the 5th April then you lose it. It can’t be carried forward. But are ISA’s a great idea at the moment?
Interest rates remain at an all-time low, and so even though cash ISA’s are tax-efficient, they aren’t returning much interest right now. You might find that an issue for your savings or you might be happy with the security.
Of course, you could look at stocks and shares ISA’s where you have options and can invest in a range of different investments. But you may feel that the market is too volatile right now with what is going on in the world.
If ISA’s are something you currently invest in or are thinking of investing in, it’s worth reviewing what the rules are.
The ISA Rules
All UK residents over the age of 18 have an annual ISA allowance of £20,000 (2020/21 tax year). This is the amount you can pay into your ISA / ISA’s, and you won’t pay tax on these proceeds.
Many people we speak to are worried that the market will drop just after they invest in an ISA. If that is a worry you can minimise the risk by drip-feeding your cash in over the course of the year, which may even out any dips in the market.
The thing is not to obsess about timing (with the exception of using your allowance before it runs out!).
Your financial advisor will talk you through what your investment goals are and how involved you want to be in managing your funds. And there are many different scenarios and no single ‘right’ way to set up an ISA. It will very much depend on your goals, your feelings about risk, your values (you might only want to invest in environmentally friendly companies for example).
Any investment bears risks but your IFA will help you to lower those risks, if you prefer a minimalised risk strategy. All investments fluctuate, and it is generally better not to respond to those fluctuations frequently. An annual review of all financial products is a good idea rather than a knee jerk reaction every time the market falls or rises.
Having said that – speed is of the essence right now if you want to take advantage of this years ISA allowance. With the craziness of the pandemic over the last 12 months, it is easy to overlook the approaching end of the tax year! We suggest you talk to us if you would like a review or any help with this year’s ISA possibilities.