Making the most of your annual allowances will help you stay on course with your long-term financial goals.
Don't miss the deadline 05.04.2025
ISAs offer flexible, tax efficient savings and are a good way to make your money work harder for you.
Everything earned from your ISA is free from Income and Capital Gains Tax – in other words, you won’t pay tax on interest, withdrawals or growth. You can invest a total of £20,000 into one ISA or multiple ISAs in the 2024/2025 tax year. ISAs are also an easy and straightforward way to invest into stocks and shares.
If you don’t use your annual allowance, you’ll lose it.
Should I choose Stocks & Shares or a Cash ISA?
Both offer flexible ways of saving. As well as offering all of the tax advantages outlined above, you can access your savings whenever you need to. They’re also a great way of subsidising your retirement and may help you to leave your pension pot untouched for longer.
An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and
any income from them can fall as well as rise. You may not get back the amount you invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Investing for the long term
You can withdraw from your ISA at any time, but it’s best that you consider investing for
the long term to minimise the effects of peaks and troughs in the market.
Over the long term (5+ years), stock markets tend to rise and therefore have the potential to give you a greater return on your investment.
You should remember that there is always risks involved with investing and you could get back less than you invested.
The power of compound growth, making your money grow faster
Investing for the long term and leaving your investment intact, means that at the end
of each year, your initial capital plus any growth is reinvested for the following year
and so on, which means that your money could grow faster.
Junior ISA (JISA)
• Set up by parents or guardians and provides an excellent long-term, tax efficient savings strategy.
• An annual allowance of £9,000 for the 2024/2025 tax year.
• Held in either Cash or Stocks & Shares.
• Entirely for the benefit of the child – the child can take control of the account at 16, but can’t withdraw funds until 18.
• Like an ISA, all growth is free of tax.
• This allowance is separate to the £20,000 ISA allowance.
Lifetime ISA (LISA)
These were launched in 2017 to incentivise savings for first time buyers and to support in later life.
• They are available to 18-39 year olds with a limit of £4,000 per year (taken out of the total £20,000 ISA allowance).
• The benefit of this type of ISA is the government will give an annual bonus of 25% of the amount saved each year. So, if the maximum of £4,000 was saved, then a bonus of £1,000 is added by the government.
• The funds accumulated in a LISA can only be withdrawn to be used against the purchase of a first home (criteria is applied such as the value of the home must be £450,000 or less), or if you are over the age of 60 to support during retirement
or upon a terminal diagnosis with less than 12 months to live.
• Withdrawing funds for any other reason will result in a withdrawal charge of 25%, which is a recovery of the governments bonus.
An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Past performance is not a reliable indicator of future performance and should not be relied upon.
Approved by 2plan wealth management on 03.02.2025
Comments