COULD YOU BE AN ISA MILLIONAIRE?
Individual Savings Accounts (ISAs) are a great way to invest free of tax on the income and any capital gains. The amount you can put in each year has gradually increased. A growing number of people are becoming ‘ISA millionaires’ as a result of rising stock market prices, and the steady increase in the annual ISA allowance.
Generous Annual Limits
The allowance for the 2017-18 tax year is set at £20,000, meaning that couples can put away up to £40,000. Sadly, it seems that the ISA message hasn’t filtered through to everyone. HMRC has produced data that shows only two thirds of those earning more than £150,000 a year use up their ISA allowance each year.
With pension contributions subject to annual and lifetime limits, ISAs represent an excellent way of topping up retirement income, although the cash or shares could be subject to inheritance tax on death, unlike the types of pension that can be passed on to beneficiaries more tax-efficiently.
Making it to a million
If you were able to invest your full ISA allowance in a stocks and shares ISA every year, the ISA limit increased by around 2% each year, and your investments made an annualised return of 5% after fees, you too could join the elite band of ISA millionaires in 22 years (purely an example for illustrative purposes). Of course, we must underline that this is not guaranteed, because stock markets can and do go down as well as up.
Planning for the future
If you’re planning to invest this tax year, it’s a good idea to put plans in place as early as possible. The longer your money is invested, the more time it has to produce tax-free returns.
You can’t carry any unused ISA allowance into the next tax year, so don’t risk missing out on the valuable tax breaks available. We can help you investigate the choices on offer, and help ensure you use your allowance wisely.
Taking financial advice
It is essential to seek financial advice for tax planning purposes as you save for your future. On the run up to the tax year end we welcome you to get in touch for a financial review to ensure you have taken advantage of tax incentives available to you.
We look forward to working with you.