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Don't miss the ISA deadline

It’s time to take control over where your money is invested tax – efficiently. Each tax year all individuals are given an annual individual savings account (ISA) allowance.  The ISA limit for 2016/17 is £15,240.
Anyone wishing to utilise their allowance needs to do so before the deadline at midnight on Wednesday 5 April 2017.  This date marks the end of the 2016/17 tax year.  It is a use it or lose it allowance so if you don’t use all or part of it in one tax year, you cannot take that allowance over to the next year.
Sheltering your money from tax
ISAs are becoming an integral part of financial planning.  However, it is important to remember that an ISA is just a way of sheltering your money from tax – it isn’t an investment in its own right.
ISAs offer a unique range of benefits, as there is no Income Tax on interest or dividends paid, and you don’t lock your money away, so you can still access it whenever you need to.
Withdrawals to increase your income
Income from an ISA doesn’t affect your personal allowance or age-related allowance, and there’s no capital gains tax (CGT) payable on any growth you may achieve.  This means you could use your withdrawals to increase your income when necessary.  However, any losses made in the ISA cannot be used to offset gains made elsewhere.
When you invest through an ISA, you don’t have to pay personal income tax on any interest you receive from your investments.
In a stocks and shares ISA, interest can be generated by bond funds which many investors choose because they offer the potential for a regular, lower-risk income when compared with equities
Useful in retirement
The feature of an ISA is particularly useful in retirement, as it means you can hold your money in bond funds and generate a tax-efficient income on top of the payments you receive from your pension.  It is also very beneficial if you want to generate long term capital growth from your funds but prefer to take a cautious approach to investing.
When your investments are held in ISAs, you don’t have to pay any CGT on the growth.  Of course, this may seem like a minimal benefit if your profits are well within the current £11,100 threshold for CGT, but it’s worth remembering that stocks and shares investments are for the long term.  If your funds perform particularly well for several years, holding them in ISAs will mean you have full access to your money at all times without having to worry about managing a potential tax burden.
Simplifying your financial administration
You don’t have to declare any investments held in ISAs on your tax return.  Whilst this might not seem like much, if you have to file an annual tax return, you will know that any way of simplifying your financial administration can be very helpful.
If you feel that your existing ISA provider is no longer appropriate for your needs or you are looking to consolidate your investments under one roof, with an ISA you are free to transfer your investments between providers to suit your individual needs.
Withdrawals from an ISA are tax-efficient
ISAs can give you control over your retirement income, as you can take as much money out as you like, whenever you want from age 55.  However at present only 25% of the pension can be withdrawn tax efficiently with withdrawals taxed at the applicable marginal rate of income tax.  Separately, a test against the Lifetime Allowance may also be applied, which could result in additional tax becoming payable.
Please contact Matthew Bromley, Chartered Financial Planner at Cowgill Holloway Wealth Management to for further advice or to discuss your situation.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication. The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

Disclaimer

The information was correct at time of publishing but may now be out of date.

Wealth Management
Posted by Cowgills
29th March, 2017
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