Make the most of your ISA allowance before the new tax year

An individual savings account (ISA) is a tax-efficient way to save or invest your money. Each tax year, you can invest up to a certain amount of money into your ISA tax-free, known as your ISA allowance.

The current ISA allowance for the 2022/23 tax year is £20,000, which means you can save or invest up to this amount without paying tax on any returns you earn.

If you’re a UK resident, it’s important to use your ISA allowance before the end of the tax year to make the most of the tax benefits and potentially grow your money over time.

The deadline for using your ISA allowance is midnight on April 5th, 2023. Any unused allowance cannot be carried over to the next tax year, so it’s important to use it before it’s too late.

There are several types of ISA available, including cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs (LISAs).

Each type of ISA has its advantages and disadvantages, and the best one for you will depend on your financial goals and risk tolerance.

Cash ISAs are a good option if you’re looking for a low-risk way to save money. With a cash ISA, you can earn interest on your savings without paying tax on the interest earned.

However, the interest rates on cash ISAs tend to be lower than the rates offered by other types of ISAs, and you won’t benefit from any potential investment returns.

Stocks and shares ISAs, on the other hand, are a good option if you’re willing to take on more risk in exchange for potentially higher returns.

With a stocks and shares ISA, you can invest in a wide range of assets, including stocks, shares, and funds.

The returns you earn from your investments are tax-free, making this type of ISA a popular choice for long-term investors.

A Lifetime ISA (LISA) is available for those aged between 18 and 40, which could be used to support your retirement or help with the purchase of your first home.

You can put in up to £4,000 each year until you are 50 but must make your first payment into your ISA before you are 40.

The Government will add a 25 per cent bonus to your savings, up to a maximum of £1,000 per year. Contributions made to a LISA count towards your total ISA limit for the year.

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Posted in IFA News.