The History Of ISAs
ISAs were introduced in April 1999 as part of Gordon Brown’s first budget and were designed to replace PEPs for equity savings and TESSAs for cash. Initially, they were not very popular because of the confusion over how much you could save in each component (you had Maxi ISAs (which were for shares) and Mini ISAs (which could have been for shares, cash or insurance). They also did not allow savers to save very much money because the allowances were very low, sometimes a maximum of just £3,000.
As time has gone on and rules were simplified, they are now a brilliant way to save because of their tax efficient nature; you don’t have to pay income tax or capital gains tax on any returns from your ISA portfolio and money can be withdrawn tax-free when needed.
They especially offer an alternative tax-efficient investment strategy for those who can no longer benefit from tax relief on their pension savings, having contributed up to their combined annual allowance and carry forward facility.
There are now 4 types of Individual Savings Accounts:
- Cash ISA
- Stocks and shares ISA
- Innovative finance ISA
- Lifetime ISA
What is the ISA Allowance?
You get an ISA allowance each tax year, which sets the maximum you can save within the tax-free wrapper from April to April. For the current tax year, you can save up to £20,000 in one type of account or split the allowance across some or all of the other types.
You must save or invest by 5th April (the end of the tax year) for it to count for that year. It’s always worth using your full allowance when possible, because if you don’t use it within the relevant tax year then you lose it – it doesn’t carry over! Naturally, you will get a new allowance in the next tax year but won’t be able to contribute anything to the old ISA allowance.
How Can I Use My ISA Allowance?
We will be completing an ISA Allowance exercise in February to see if you have any scope to utilise your allowance for this tax year. If I feel you can benefit, we will get in touch closer to the time to obtain your approval. In the meantime, if you have any questions about ISAs or wish to contribute any new funds towards your ISA allowance, please feel free to contact me to discuss your options