Now is the time to invest in an ISA
An ISA-or Individual Savings Account-is a tax efficient way to save as you pay no income or capital gains tax on the returns you receive. It remains one of the taxman’s most valuable concessions to investors.
LONG-TERM INVESTING STILL MAKES SENSE
The past few years have been challenging for investors. In fact, anyone looking at their returns over the last decade might question the ability of markets to help them meet their financial goals. However, history has shown that the low point in sentiment is also the moment of maximum financial opportunity. History has also demonstrated that a long-term investment strategy is more often than not rewarding. Although past performance is not a guide to future returns.
A GREAT OPPORTUNITY TO PROTECT YOUR MONEY FROM THE TAXMAN
The current tax year provides each individual with an ISA allowance of £10,680 – that’s a total of £21,360 for a couple, all protected from the clutches of the taxman. These figures rise to £11,280 and £22,560 respectively for the 2012/13 tax year. The earlier you start investing in an ISA, the sooner your tax efficient investment begins to work for you. However, if you’ve not yet invested in an ISA this year, it’s not too late. What’s most important is that you fully utilise your allowance where possible, as once the 5 April ISA deadline passes you lose any unused allowance forever.
AND THE TAXMAN CAN’T TOUCH IT
Plus when you invest in an ISA, you will have the benefit of not having to pay tax on your investment returns (both capital growth and/or income). This means you could build up a substantial sum over the years, (depending on level of contribution and investment growth) by investing in cash, equities or corporate bonds to provide growth or income, which you can withdraw whenever you want. Alternatively, if you don’t want to make a decision immediately about where to invest, but equally don’t want to lose your allowance for this tax year, some providers offer you the option to ‘park’ the whole allowance in cash until you are ready to invest in the fund of your choice.
WHY IT MAKES SENSE TO INVEST FOR A CHILD’S FUTURE
You may also be aware of the Government’s new initiative that has launched, the Junior Individual Savings Account (ISA), which allows you to take advantage of tax-efficient savings on behalf of your child or children. Like any other ISA, you can invest in a Stocks and Shares Junior ISA, a Cash Junior ISA or a combination of the two. The key difference is that a Junior ISA is exclusively for under 18’s, who are resident in the UK. The account is held in the child’s name, but they can’t access the money until they turn 18. Once opened by you (the parent or guardian) you can continue, with other members of your family or friends, to invest up to £3,600 each tax year for each eligible child. Unfortunately if your child holds a Child Trust Fund, they are not currently eligible for a Junior ISA. If you would like to find out more please read my earlier Junior ISA blog post.
Please contact us to arrange a review of your investments and to discuss building up your ISA portfolio.
By David Gibson
Investment and ISA Cash ISA Junior ISA Advice in Coleraine Ballymoney Portrush Bushmills Portstewart