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DON ' T MISS THE ISA DEADLINE
by Sam Hulson of First Equitable
Each tax year , we are given an annual Individual Savings Account ( ISA ) allowance . This can build up quickly , letting you accumulate a substantial tax- efficient gain in the long-term .
The ISA limit for 2020 / 21 is £ 20,000 . The proceeds are shielded from Income Tax , tax on dividends and Capital Gains Tax . To utilise your ISA allowance , you should do so before the deadline at midnight on Monday 5 April 2021 .
We ’ ve answered some typical questions we get asked about how best to use the ISA allowance to help make the most of the opportunities as this tax year draws to a close .
Q : CAN I HAVE MORE THAN ONE ISA ? A : You have a total tax-efficient allowance of £ 20,000 for this tax year . This means that the sum of money you invest across all your ISAs this tax year ( Cash ISA , Stocks & Shares ISA , Innovative Finance ISA , or any combination of the three ) cannot exceed £ 20,000 .
Q : WHEN WILL I BE ABLE TO ACCESS THE MONEY I SAVE IN AN ISA ? A : You can take money out of your Cash ISA but how much , and how often , depends on which type of ISA you have . If your ISA is ‘ flexible ’, you can take out cash then put it back in during the same tax year without reducing your current year ’ s allowance . Your provider can tell you if your ISA is flexible .
Stocks & Shares ISAs and Innovative Finance ISAs don ’ t usually have a minimum commitment , which means you can take your money out at any point . That said , you should invest for at least five years . As such , if you ’ re looking to use your money within the next few years , you should probably keep it in a Cash ISA . There are different rules for taking your money out of a Lifetime ISA .
Q : CAN I TAKE ADVANTAGE OF A LIFETIME ISA ? A : You ’ re able to open a Lifetime ISA if you ’ re aged between 18 and 39 . You can save up to £ 4,000 each tax year , every year until your 50th birthday . The government will pay an annual bonus of 25 % ( capped at £ 1,000 per year ) on any contributions you make .
Q : WHAT IS AN INNOVATIVE FINANCE ISA ? A : An Innovative Finance ISA allows individuals to use some or all of their annual ISA allowance to lend funds through the Peerto-Peer lending market . Peer to Peer lending allows individuals and companies to borrow money directly from lenders . Your capital and interest may be at risk in an Innovative Finance ISA and your investment is not covered under the Financial Services Compensation Scheme .
Q : WHAT IS A HELP TO BUY ISA ? A : A Help to Buy ISA is a government scheme designed to help you save for a mortgage deposit to buy a home . The scheme closed to new accounts at midnight on 30 November 2019 . If you have already opened a Help to Buy ISA ( or did so before 30 November 2019 ), you will be able to continue saving into your account until November 2029 .
Q : I ALREADY HAVE ISA ' S WITH SEVERAL DIFFERENT PROVIDERS . CAN I COMBINE THEM ? A : Yes , you can , and you won ’ t lose the tax- efficient ‘ wrapper ’ status . Consolidating your ISAs may also substantially reduce your paperwork . We ’ ll be happy to talk you through the advantages and disadvantages of doing it .
Q : CAN I TRANSFER MY EXISTING ISA ? A : Yes , you can transfer an existing ISA from one provider to another at any time as long as the product terms and conditions allow it . If you want to transfer money you ’ ve invested in an ISA during the current tax year , you must transfer all of it . For money you invested in previous years , you can choose to transfer all or part of your savings .
Q : WHAT HAPPENS TO MY ISA IF I DIE PREMATURELY ? A : If you die , the money and investments you hold in an ISA will be passed on to your beneficiaries . After your death , your ISA will retain its tax benefits until one of the following occurs : the administration of your estate is completed ; or the ISA is closed by your beneficiary .
STILL UNSURE WHAT ’ S RIGHT FOR YOU ? Tax efficiency is a key consideration when investing because it can make such an enormous difference to your wealth and quality of life .
If you want to understand more about your ISA options , or even a review of any existing ISAs you already hold , please contact us . You can also email me at : sam . hulson @ first-equitable . com
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