There has been so much going on in the world – from war to rate rises and from covid worries to inflation – that you might be forgiven for overlooking a key financial event.
On April 6, we entered the 2022/23 tax year. This is crucial for good financial planning – because it means that your tax allowances have reset. It is therefore a very good time to look at your ISA arrangements – because if you want to make your ISA work harder, you may need to act now.
Your ISA allowance is limited
ISAs can be particularly rewarding because they are tax efficient.
Anything you put inside an ISA can potentially grow faster than it would outside, because the taxman will not be taking a share of any profits. What’s more, when the time comes to cash in your ISA, under current legislation you will have no income tax or capital gains tax to pay.
In fact, an ISA investment is so tax efficient, the UK Government puts a limit on what you can invest each year.
Savers and investors can put up to £20,000 in their ISAs in 2022/23. You can invest the whole amount in one ISA or split it across different types, for example a Stocks and Shares ISA and a Cash ISA
Use your ISA allowance carefully
The limit on your tax-efficient investments makes choosing the ISA that is right for you essential. The simple answer is to get the Continuum team to find it for you.
We can advise on and recommend funds designed to meet your attitude to risk, for example aiming for cautious growth, or if your attitude to investment risk is for a more aggressive approach, whilst aiming to building your wealth, we can research appropriate funds. If retirement is close, we can find you funds that aim to provide a steady income.
But whatever you choose, there are some sound reasons for making the decision, and making the most of your ISA now.
Use your ISA allowance now
Your 2022/23 ISA allowance lasts for the whole year. You could wait until April 5th next year to use it – but it would be unwise. Time really is money, and the longer money is invested, the greater its potential for growth. The new tax year is already more than a month old.
Investing at the beginning of the tax year rather than the end ensures an extra 365 days for your cash to earn returns.
Of course, not all of us are in the fortunate position of having £20,000 to invest in an ISA. Fortunately, many ISA providers accept monthly investments, which ensures that ISA investment is as simple as saving with a savings account.
What’s more, making a steady payment in helps smooth out the bumps in the market, in a process known as pound cost averaging. Buying fewer shares when prices are high and more when prices are low is an efficient way to build your overall holding.
Your ISA allowance deserves expert support
With so many ISAs to choose from and sound reasons to act now, it makes sense to get expert support without delay. At Continuum we can help you find the ISAs with the investment approach that best matches your own and help you through the maze of performance comparisons and costs.
We can use that knowledge to help you find the provider that is right for your plans and make the most of the new tax year.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Equity based investments do not afford the same capital security as deposit accounts.