Make the most of your tax-free £20,000 savings allowance per year

Whether you’re saving for a special event, a big purchase or a rainy day, Individual Savings Accounts or ISAs provide a great way to make your money grow without attracting UK Income Tax or Capital Gains Tax. Introduced over 20 years ago and particularly attractive to higher-rate taxpayers, ISAs have become an integral part of many financial plans.

In line with the 2020/21 tax year limit, you can place up to £20,000 per person within one single ISA or multiple ISAs without paying a penny on personal tax. Your annual allowance doesn’t roll over each year, so it’s important to ensure that you take maximum advantage of this tax-saving opportunity.

There are four main types of ISAs available with different structures and risk levels, including:

Much like a standard savings account, Cash ISAs enable you to deposit money and gain interest without taxation. Cash ISAs are available in a variety of forms, from fixed-rate interest set-ups to instant access, where you can withdraw money whenever you like.

Stocks & Shares ISAs allow you to put your money into a range of investments, with the potential for greater rewards but also additional risk. Great for individuals who are happy to invest whilst wanting to protect profit or interest from tax, Stocks & Shares ISAs can be tailored to suit your risk appetite, from more conservative investments to high-risk, high-reward strategies.

A newer form of ISA, Innovative Finance ISAs have similarities with Stocks & Shares ISAs, but are designed for use with peer-to-peer lending investments. Peer-to-peer lending is a form of investing where you directly lend money to individuals, businesses or property developers through P2P lending platforms, where the recipient of your loan pays back the borrowed amount with additional interest over a specified period.

A Lifetime ISA provides a 25% government bonus on your savings, up to a maximum of £1,000 a year. With LISAs, you can deposit up to £4,000 a year until you reach the age of 50, which counts as part of your overall ISA annual limit. A LISA differs from other ISAs in that withdrawing from your savings should mainly be used for buying your first home, if you’re aged 60 or over, or are terminally ill with less than 12 months to live. If you withdraw money from your LISA for any other reason, you’ll pay a set withdrawal fee in the form of losing your government bonus on that amount.

If you’re a parent or guardian with parental responsibility, you also can open a Cash or Stocks & Shares Junior ISA (JISA) in your child’s name, steadily growing your savings for them until they gain access at 16, and withdrawal rights at 18.

From Stocks & Shares ISAs to Innovative Finance ISAs, the range of ISA types available can seem overwhelming. At Angell Mallinder, we’ll utilise our years’ of ISA experience to find the best possible solution for your financial requirements, explaining the risk levels, conditions and most effective investment strategy. We’ll help you to maximise the benefit you receive from your annual ISA allowance, and assist in helping to save regularly and earn interest on your hard-earned mone.

To discover more about the best ISA for you, or to discuss other tax-efficient saving options, get in touch with the Angell Mallinder team today for expert advice.

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