Are You Making Full Use of Your ISA Allowance?

ISAs are well-known investment products, with both cash and share accounts available to customers.

Around 2.2 million people in the UK (just over 3% of the total population) were subscribed to a stocks and shares ISA account in 2019, with the average value of this type of account estimated at £27,000 around this time. 

However, studies have shown that fewer than half of Brits make full use of their annual tax-free ISA allowance. But what steps can you take to reverse this trend as an ISA holder?

What Does the Research Tell Us?

According to research, fewer than 50% of Brits have optimised their annual tax-free ISA allowance, at least among those with a minimum of £50,000 in investable assets in their accounts.

Overall, just 48% has utilised their full allowance, with the individuals in this demographic considerably more likely to have sought professional advice about financial planning and wealth management.

This trend was echoed in how investors utilised their pension contributions. Of this number, just 20% had made full use of their £40,000 tax-free pension allowance, and once again such individuals were inspired by the guidance that they received from a financial professional.

How to Maximise Your ISAs Tax-free Allowance

With this in mind, liaising with a financial professional can obviously help you to maximise your ISAs tax-free allowance. But what other steps can you take to achieve this objective?

• Remember Capital Gains Tax Allowance: As an individual ISA account holder, you’ll be granted an annual allowance for any capital gains realised during a specific tax year. This was fixed at £12,000 per person during 2019/20, creating a significant allowance that offers huge value to investors. If you happen to invest in less tax-efficient vehicles, you could also consider ‘bed and ISA’ transactions which see such assets sold up to the value of any remaining CTG allowance.

• Move Between Cash, Stocks and Shares: Since 2014, it has been possible to invest up to the full ISA subscription limit in either cash, stocks or shares ISAs. You’re also able to hold as much cash as you like in a stocks and shares ISA, creating genuine flexibility that enables you to maximise your allowance in a wide array of circumstances. It’s also ideal for newbie investors, who may not feel equipped to go all-in with a stocks and shares ISA when starting out.

• Are You a Parent or Guardian: If you’re a parent or guardian of a child under-18, you can also open Junior ISAs for your kids. The current limit per child has increased to £9,000 from April 6th, with this doubling the subscription limits for JSAs across the board. So, you can invest in this type of account along with grandparents and other contributors to help save for your children’s future, while benefiting from further tax allowances and benefits.

*This is a collaborative post.