On 6th April your ISA (Individual Savings Account) allowance will have reset, with £20,000 being the maximum you can save or invest within this new tax year.
An ISA is a good way to save or invest in a tax efficient way.
Stocks & Shares ISA or Cash ISA?
A cash ISA is similar to an ordinary savings account, except you do not pay tax on any of the interest you earn. With a stocks and shares ISA your money is invested in the stock market, and you will not need to pay any tax on returns you make, therefore you keep all of your potential gains.
If you are looking at just a short term holding for your cash, then a cash ISA might suit your better.
Inflation can silently eat into your cash savings over time, so if you aren’t planning to touch your savings for 5+ years, then a stocks and shares ISA would be more suited as over the long-term, investing often outperforms cash.
Invest now or wait until later in the year?
You can use your ISA allowance at any point within the tax year but using it at the start of the tax year could help maximise your returns as the longer you are in the stock market the greater chance of potential growth, plus you could see the power of compounding.
Compounding is when profits (such as interest of dividends) made by the companies you invest in, are put back into your pot. By leaving these profits in your ISA, these profits will also start working and generate further profits. Over time, this could have a snowball effect.
Ready to start investing…?
If you have £20,000 or more you would like to invest, please contact us for Independent Financial Advice on 01803 873978 or using the form below.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.