Should you invest into an ISA as we approach the tax year end?


As the end of the financial year looms, it’s your last chance to use up your current ISA allowance. If you’ve decided that it’s too late to be bothered with your ISA then think again – you may still have time and if you don’t use it, you do lose it. Some people think that ISAs are complicated or that they require you to fill out tax returns, but for most people that’s not the case. 

Cash ISAs are as easy to manage as standard savings accounts, while Stocks and Shares ISAs can  be a really accessible way to manage investments.  The tax year runs from 6 April to 5 April, and the 2018-19 ISA allowance is £20,000, which can be any combination of cash, stocks and shares.

If it’s near the end of the tax year (5 April), you may have missed almost a whole 12-month period where your money could have been earning tax-free interest or, growth. But that doesn’t mean it’s not worth saving now. After all, most people use ISAs for long-term saving, even if it’s a rainy day fund. If you never have an emergency then you’ll keep that cash saved for the long term. That means that using your allowance now will let you benefit from future tax-free years.

Remember that – depending on the account you choose – you’re not necessarily tying your money up for an extended period of time and you could still have the funds to hand. Also balance the long-term benefits of taking advantage of your tax-free ISA allowance against what would happen if you left your money where it already is.

For example, it’s possible that your bank account is offering a better return than the ISA you’re considering. If you have existing tax-free savings from previous years, it’s possible that they’re earning a pittance; many providers offer their best deals on new accounts. However, if you open a new ISA account that accepts transfers, then you can move your existing tax-free savings into that account, too. Whatever you do, don’t withdraw the money in order to pay it in or it may lose its tax-free status; instead ask your advisor to arrange a transfer.

A Stocks and Shares Individual Savings Account (ISA) acts as a tax-free wrapper for stock market and other sorts of investment classes. It has many advantages – especially for higher-and additional-rate tax payers – but it’s also a complex product that involves an element of risk, meaning that the value of your investment can go down as well as up. Each year you have an ISA allowance, which is an amount you can put into tax-free savings and investments. Many clients seek to set up an auto ISA option which allows existing investment funds to be switched over to the ISA account automatically as an ongoing feature.

Remember that past performance is not an indication of what will happen in the future

To open a Stocks and Shares Isa you must be a UK resident (or a Crown employee serving overseas, or the spouse of one) and be aged 18 or over. You can only open one with one provider each tax year, although you can have different Stocks and Shares ISAs with different providers in different years. Essentially this means that you can’t split your annual allowance between different providers.

Should I pay in a lump sum or make regular payments? As with most questions around investments, there is no guaranteed answer to this question, but it’s generally felt that drip-feeding in money through regular payments minimises risk. Particularly, in the current volatile markets in the run up to Brexit on the 29th March. If you pay in a lump sum it’s possible that the market will shoot up and you’ll immediately make a significant gain – but the reverse is equally true. Making regular payments may help to smooth out the volatile nature of the market.

The Stocks and Shares ISA is subject to the same inheritance tax treatment as other ISAs meaning that, on the death of the account holder, the funds will form part of the estate for inheritance tax purposes. A spouse or civil partner can inherit ISA tax advantages and is able to invest, on top of their usual annual allowance, as much as their late spouse or partner had accumulated, under a special rules known as Additional Permitted Subscriptions.

By seeking independent professional advice you can be assured that the right solution will be recommended and all possible options are considered. These include new to market offers such as structured plans that can provide a capital guarantee whilst offering better growth potential.

As this is a specialist area of advice it is important to seek out this information from an appropriate independent financial adviser. Richmond House Group has this specialist knowledge and are always available to answer your questions.

This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case. Based upon our understanding of UK tax law at February 2019. The value of investments can fall as well as rise and you may not get back the full value of your investment



John Merrifield.

Dip PFS, Cert (CII) MP.