The rules around ISAs (or individual savings accounts) change relatively often and different types of ISA rise and fall in popularity depending on where savers consider the most competitive place to put their hard-earned money.
ISAs are a great way to save because of their tax efficiency. You don’t pay income tax or capital gains tax on the returns and you can withdraw the amount any time as a tax-free lump sum. Because of their tax efficiency, there are set limits on how much you can save using ISA accounts.
The 2019/20 tax year is an interesting year for ISAs because the main annual allowance isn’t increasing. The yearly total you can invest in an ISA remains at £20,000. This means that the ISA limit remains unchanged since April 2017.
Remember that all ISAs don’t have the same allowance. For Help to Buy ISAs, you can only save a maximum of £200 a month, on top of an initial deposit of £1,200. Lifetime ISAs (LISAs) have a maximum yearly allowance of £4,368, on top of which you benefit from a government top-up of 25% of your contributions.
One ISA allowance that is rising (slightly!) is the Junior ISA, increasing from £4,260 to £4,368. This means that relatives can contribute slightly more to a child’s future, in a savings account that can only be accessed when they reach 18. Junior ISA accounts are rapidly gaining in popularity, with around 907,000 such accounts subscribed to in the tax year 2017/2018. Great news for the youngest generation!
Stocks and Shares ISAs are also gaining more popularity, with an increase of nearly 250,000 in the last tax year. On the whole, though, the number of Adult ISA accounts subscribed to in the last year fell from 11.1 million in 2016/17 to 10.8 million in 2017/18.
For investors with Stocks and Shares ISAs, Brexit uncertainty has understandably created cause for concern. In this scenario, your best course of action is to make sure that your investments are properly diversified around the globe. Speak to your financial adviser if you are unsure about what you can do to reduce risk during any post-Brexit turbulence. They’ll be more than happy to help.
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THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.