As another tax year end approaches we can expect the usual deadline headlines regarding using your ISA allowance. As with all financial planning, there is merit in doing so, as long as the vehicle you use matches your objectives and is held in an arena with which you are comfortable.
They are one of the only tax-advantaged investments left and with a raised individual allowance of £15,240 it has now become a very efficient way to accumulate tax-efficient savings, especially for a couple.
Ever since ISA’s were introduced in 1999 they have often been confusing due to their differing guises and names so it may be better to simply regard them as tax-wrappers. In effect, that is all they are, they tax-wrap an underlying deposit or investment.
The risk nature of that underlying asset can vary greatly. For example, a cash ISA is akin to having money in the bank but paying no tax on the (currently low) interest that you receive. You will not experience the fluctuations evident with Stocks and Shares ISA’s. The latter themselves have a massive range of assets and funds that can be held within the structure so don’t simply assume something named stocks and shares ISA moves like the FTSE 100 every day – it wholly depends on your investment selection underneath that wrapper.
One of the best ways an adviser can help is to put the ISA wrapper element to one side in the first instance and explain the different types of underlying holding. Then we can gauge what is comfortable given the clients risk tolerances and objectives and the wrapper can be added to the discussion (as per the above limits).
There are also alternative underlying assets which have been popular of late – for example, those which can provide a set level of income irrespective of the movement of the capital value and even those which offer a return based on stock markets but not being invested in it.
As with other areas of financial planning, if as advisers we can try and simplify and clarify what is available then the client will be able to make an informed decision.
The above is provided for information purposes only and we recommend that professional independent advice is taken prior to making any decisions or taking any action.
They are one of the only tax-advantaged investments left and with a raised individual allowance of £15,240 it has now become a very efficient way to accumulate tax-efficient savings, especially for a couple.
Ever since ISA’s were introduced in 1999 they have often been confusing due to their differing guises and names so it may be better to simply regard them as tax-wrappers. In effect, that is all they are, they tax-wrap an underlying deposit or investment.
The risk nature of that underlying asset can vary greatly. For example, a cash ISA is akin to having money in the bank but paying no tax on the (currently low) interest that you receive. You will not experience the fluctuations evident with Stocks and Shares ISA’s. The latter themselves have a massive range of assets and funds that can be held within the structure so don’t simply assume something named stocks and shares ISA moves like the FTSE 100 every day – it wholly depends on your investment selection underneath that wrapper.
One of the best ways an adviser can help is to put the ISA wrapper element to one side in the first instance and explain the different types of underlying holding. Then we can gauge what is comfortable given the clients risk tolerances and objectives and the wrapper can be added to the discussion (as per the above limits).
There are also alternative underlying assets which have been popular of late – for example, those which can provide a set level of income irrespective of the movement of the capital value and even those which offer a return based on stock markets but not being invested in it.
As with other areas of financial planning, if as advisers we can try and simplify and clarify what is available then the client will be able to make an informed decision.
The above is provided for information purposes only and we recommend that professional independent advice is taken prior to making any decisions or taking any action.
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