6th April 2019 sees the start of a new tax year, so here are some points on which Individual savings account (ISA) you should consider.
For the 2019/20 tax year, an individual can invest up to £20,000 in an Individual Savings Account (ISA).
By saving at the start of the tax year and utilising your full allowance, it will mean that it has a more extended period invested, which gives it the opportunity to enhance your returns.
It is by far an easy way to save and you have the options of either investing it in a cash ISA, a stocks & shares ISA, or both. Although with Interest rates currently low, we are finding that most of our clients are choosing to invest in a stocks & shares ISA.
That’s said, if you feel you are a little nervous about investing straight into stocks and shares ISA, then you could do a combination of stocks & shares and cash ISA’s.
When the time comes, that you wish to invest more into a stocks & shares ISA, the cash ISA can be transferred across.
These are probably the simplest type of ISA and therefore quite popular, but you should note that their popularity is falling as interest rates are so low.
They often have low rates of interest of around 1% or less, so you won’t see huge returns on your money.
Stocks and Shares ISA:
Your money is invested in stocks and shares, as the name indicates. As such, returns can go down as well as up, so they are worth holding on to over several years.
Cash ISA’s can be transferred into a stocks & shares ISA even if that means you exceed £20,000, as it would be already coming from an existing ISA and your contribution limit for 2019 would not be affected.
If you have children under the age of 18, from 6th April 2019, you can invest £4,368 into a Junior ISA. It is an ideal way to do some tax-efficient savings for your children and family and friends can also contribute.
The child cannot withdraw monies from their Junior ISA until they reach the age of 18.
Also, if you are between 18 and under 40 years of age, you can put £4,000 each year into a Lifetime ISA until you reach the age of 50 and providing you do not withdraw it you could benefit from a government bonus of 25%, up to a maximum of £1,000 per year.
You can hold cash or stocks and shares in your Lifetime ISAor have a combination of both, but it will make up part of your overall £20,000 allowance.
Help to Buy ISA:
These are designed to help first first-time buyers save toward a deposit for your first home and the Government will boost your savings by 25%.
So, for every £200 saved, you would receive a government bonus of £50. The maximum government bonus that you can obtain is £3,000.
In your first month, you can deposit a lump sum of up to £1,200, then add up to £200 per month. As the minimum government bonus is £400, it means that you need to have saved at least £1,600 into your Help to Buy: ISA before you can claim your bonus.
To obtain the maximum government bonus of £3,000, you need to have saved £12,000.
That said, the accounts are available to each first-time buyer, not each household. So, if you are planning to buy with your partner, for example, you could receive a government bonus of up to £6,000 towards your first home, if you save £12,000 each.
These are just a few tax efficient options open to you and your family, but there may be many more!
If you wish to discuss the allowances available to you, please contact us at firstname.lastname@example.org to arrange a free initial consultation.
The values of Investments can Fall as well as Rise; you may get back less than you invested.
Tax treatment varies according to individual circumstance and is subject to change.