Maximise Your ISAs – With a Simple Review
Your annual ISA allowance is increasing to a whopping £20,000 in the next tax year. With this in mind here we wanted to put together a jargon-free and super easy to understand guide to help you review your ISAs properly and take advantage of one of the very best tax breaks that is available to savers.
Starting at the beginning: Commonly asked ISA questions
If you are new to what an ISA may offer you, here are some key questions that you may have (seasoned ISA holders may want to move onto the next section for our top ISA makeover tips!).
Can an ISA help with reducing my tax bill?
ISAs are tax free, which means the interest that you receive upon them aren’t taxed as they are with other savings accounts.
How much can I save in an ISA?
Currently the allowance for the financial year 2015/2016 is £15,240.
How can I harness an ISA for pension freedom?
As with any form of investment, there are risks, and when looking to ISAs as a personal pension plan it pays to appreciate that this is an option that requires careful consideration as to the risks you’re willing to take.
Adapting and evolving your plan as you go is key – if you’re looking set to achieve your aimed for income by a certain time, then consider switching to lower returns, lower risk options to safeguard your pension pot.
Give your ISA investments an end of year make over
You’ve likely already broken any New Year’s resolutions you made, but it’s not too late for your finances – here are 8 steps to help you in making over your ISAs for a prosperous new financial year.
- Take time to review your savings plan
Dreaming of pension freedom? Planning for financial independence? Whatever your aspirations you need to ensure that your current investments reflect your goals today, rather than the goals that they may have been aiming for when originally set up. This may mean switching your attitude to risk to achieve something sooner or, if you’re in the ideal position of being on your road to achieving your goals early, taking the wise decision of choosing a less risky approach.
- Shake off poor investments
With in-excess of 2,000 funds to choose from the investment landscape can often be confusing, yet it is thought that only around 100 funds are truly worth considering, as many act only as trackers.
Deciding to either go for a true tracker or opting for the services of a fund manager are really the two choices you have and can help provide clarity within a portfolio that may have become bloated with ineffective investments.
- Forget about emotions – this is business
If you’ve held an investment for a number of years it can prove difficult to let go, particularly if they’ve previously made significant returns, or even if they’ve lost money and you’re holding out to make your money back.
However, removing emotions from the equation is really an essential when talking investment business – base your choices upon facts and evidence, rather than upon your own feelings.
- Make the most of your investments by reinvesting dividends
Don’t rely upon your investments for income? If not then you need to ensure that you’re capitalising upon the prospect of compound interest with funds that automatically reinvest your dividends.
- Be sure to use up any remaining allowance if you have the cash to do so
We aren’t particularly spoilt with tax breaks in the UK, so it really does pay to make the most of your ISA allowance if you’re able to do so. In the lead up to April 5th establish just how much you’ve saved within your ISA (remember, the current allowance stands at £15,240).
If you’re feeling indecisive you can always pop any spare money into a cash ISA until you decide where to place your funds.
If you need any help reviewing your ISAs or selecting new ones, contact our professional savings team today.
The financial conduct authority does not regulate wills, taxation and trust advice.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
The value of investments can go down as well as up and you may not get back the amount invested.