{"id":3630,"date":"2019-01-21T14:45:57","date_gmt":"2019-01-21T14:45:57","guid":{"rendered":"https:\/\/www.georgehay.co.uk\/blogs\/?p=3630"},"modified":"2023-11-15T20:31:02","modified_gmt":"2023-11-15T20:31:02","slug":"7-things-isa-turns-20","status":"publish","type":"post","link":"https:\/\/www.georgehay.co.uk\/blogs\/2019\/01\/7-things-isa-turns-20\/","title":{"rendered":"7 things we think you should know as the ISA turns 20\u2026"},"content":{"rendered":"

The Individual Savings Account (ISA) was first introduced back in April 1999, meaning that this year marks its 20th<\/sup> anniversary.<\/span><\/p>\n

Online investment broker, Hargreaves Lansdown, estimates that approximately \u00a38.7trn has been invested in the tax-free accounts during that time.<\/span><\/p>\n

ISA\u2019s can be a flexible way to save and invest whilst enjoying significant tax benefits, especially for higher earners and the range of investment options has evolved drastically since 1999. However, as ISA\u2019s have evolved, many also feel that they have become increasingly complex and difficult to get to grips with.<\/span><\/p>\n

Wherever you look for information on ISA\u2019s, you\u2019ll likely come across strong arguments for and against investing in them; some will perhaps even tell you that the ISA is dead!<\/span><\/p>\n

The truth is though, that they are very much still alive and kicking. Whilst this is the case, it\u2019s worth considering whether there might be reasons that an ISA is right for you.<\/span><\/p>\n

Whilst you mull that over \u2013 here are 5 things we think you should know about ISA\u2019s:<\/span><\/p>\n

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1 – Back to basics<\/strong><\/span><\/h5>\n

When it comes to ISA\u2019s, it\u2019s all too easy to forget the basics. An ISA is a type of savings account. You can earn interest, dividends and capital gains from an ISA without ever being taxed.<\/span><\/p>\n

The maximum amount you can save into an ISA for the 2018-19 tax year is \u00a320,000. This limit is enforced by the UK government and is likely to remain for at least the next two years.<\/span><\/p>\n

This means that, annually, you can protect up to \u00a320,000 of your savings in a \u2018tax-free wrapper\u2019. There are several different ISA products available on the market and you can choose to split your annual contribution between these, in whatever proportion you\u2019d like. <\/span><\/p>\n

However, you can only contribute to one of each type of ISA, in each tax year.<\/span><\/p>\n

Each year, there is a deadline by which you should have utilised as much of your allowance as possible; the 5 April, which also marks the end of the tax year. On the 6 April, your \u00a320,000 ISA allowance will refresh.<\/span><\/p>\n

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2 – ISA allowance: Use it or lose it<\/strong><\/span><\/h5>\n

If you have an ISA, it\u2019s important to remember that any allowance remaining at 5 April 2019 will be lost. You cannot carry over your unused allowance from year to year, so you should always look to use up as much of it as you can before the end of the tax year. When it\u2019s gone, it\u2019s gone!<\/span><\/p>\n

 <\/p>\n

3 – Brexit, bank rates and the PSA<\/strong><\/span><\/h5>\n

Benjamin Franklin once said, \u201cnothing in life is certain, except death and taxes\u201d and to some degree, he\u2019s right. With Brexit on the horizon, threatening an economic slowdown, and the potential for taxes and bank rates to increases, ISA\u2019s could be a safe bet amidst major change.<\/span><\/p>\n

When we consider the dip in the number of people opting to save into an ISA, in recent years, the Personal Savings Allowance (PSA) is often identified as the reason for this.<\/span><\/p>\n

The PSA, which came into effect on 6 April 2016, means that basic-rate taxpayers can now earn up to \u00a31,000 in savings income tax-free. Higher-rate taxpayers can earn \u00a3500. <\/span><\/p>\n

Ultimately, many people realised that they could opt for a non-ISA savings account, avoiding the relatively low interest rates, but still benefit.<\/span><\/p>\n

However, the key thing to remember here is that there is no telling what will happen to the personal savings allowance and how long it will last. As for ISA\u2019s, they will likely always be tax-free, and the rules are less vulnerable to change.<\/span><\/p>\n

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4 – The best time to invest<\/strong><\/span><\/h5>\n

Around this time each year, along with many other accountants and financial advisers, we begin to encourage our clients to think about end-of-year tax planning and, as part of this, using up any remaining ISA allowance.<\/span><\/p>\n

However, that isn\u2019t to say that final few days of March is the best time to top-up your ISA or quickly deposit that \u00a320,000 you\u2019ve been sitting on.<\/span><\/p>\n

If on the 6 April 2019, you have \u00a320,000 ready to deposit\u2026 do it. If you sit on it or keep it in another non-ISA account until later in the year, then you\u2019re effectively paying tax on your savings when you needn\u2019t.<\/span><\/p>\n

If you don\u2019t have \u00a320,000 ready to deposit in April, move over what you can and <\/span>top it up throughout the year.<\/span><\/p>\n

 <\/p>\n

5 – Instant access or fixed-rate?<\/b><\/span><\/h5>\n

<\/b>If you\u2019re considering an ISA, know the difference between instant access and fixed-rate.<\/span><\/p>\n