25th April 2019
The 6th April 2019 ushered in the start of a new tax year and with it came a fresh opportunity to invest in an ISA. In this article we are going to take a quick look at what ISA options are available for this tax year and some of the basic rules behind this investment vehicle.
Let’s start with what an ISA actually is. ISA stands for individual savings account. First introduced in the 1990/2000 tax year, an ISA is a tax-free investment. That means that whether the ISA grows in value, attracts interest or dividends, when the investment is realised there is no tax to pay. That can make it an attractive form of investment and because of this there is a limit to the amount that any one individual can invest in an ISA in each tax year. Moreover, unused allowances for one tax year cannot be carried forward to the next; in effect resetting the allowance at the beginning of each new tax year.
The majority of individuals invest in either a cash ISA or a stocks and shares ISA. However investors should also be aware of the availability of innovative finance ISAs, help to buy ISAs, and lifetime ISA’s as they may prove more advantageous for an individual’s personal circumstances. It is worth noting that help to buy and lifetime ISAs carry specific restrictions and investing in these may impact on your overall investment decisions. Investors may therefore wish to take financial advice to ensure that they are not breaching any of the regulations surrounding ISAs.
For the current tax year the adult ISA limit remains unchanged at £20,000. Within this overall limit, investors are free to mix and match within the various ISA types, subject to the restrictions mentioned in the previous paragraph. So, for example, an individual could split their investments equally between a cash ISA and an innovative finance ISA, or invest the full £20,000 in a stocks and shares ISA. It is worth noting that an individual can only open one ISA of each type within a tax year. This means that you wouldn’t be able, for example to open a cash ISA with two institutions in the same tax year, although it is possible for existing ISA to be transferred from one institution to another.
Although the adult ISA limit is currently frozen at £20,000, for the 2019/20 tax year the junior ISA limit rose in line with inflation to £4,368.
Thompson Jenner Financial Services Director Neil Sear commented that “although on the face of it ISAs seem to be fairly straightforward, it is important that investors are fully aware of all the options, terms and conditions if they are to choose an ISA mix which best meet their long-term needs.”
If you would like to find out more or meet to discuss ISA’s or any Investment Planning advice which we are able to provide, please contact Neil Sear at either our Exeter or Exmouth office on 01392 258553 or 01395 279521 to arrange a free initial meeting.