“People should absolutely be using their ISA allowance”, says Lee Robertson, CEO of the wealth management firm Quorum Investment. “With the tax office looking at any and every tax break and allowance, people should be taking advantage of their full £10,200 amount.”
Beyond the increased allowance over a cash ISA, of £10,200 versus £5,100, the benefit of an investment ISA is the breadth of choice that is offered, not just stocks and shares, but also funds, gilts and bonds, exchange-traded funds (ETF), exchange-traded commodities (ETC) and structured products. Individuals can choose from a wide range of products to build a bespoke portfolio that suits their risk appetite and investment objectives.
According to Catherine Penney, vice president of Barclays Stockbrokers, “in the longer term there is a significant benefit as income from ISAs does not count against your income tax allowances, so they can effectively supplement pensions.”
“The current low interest rate environment, coupled with inflation, means it is harder for investors to gain returns on cash, meaning that now, more than ever, is a good time to invest in a stocks and shares ISA, provided that the additional risk to capital is acceptable.”
The returns to be had by taking advantage of your combined allowance if you are investing as a couple are not to be sniffed at. According to research carried out by Fair Investment Company, a couple who had invested in stocks and shares ISAs since 1999 could have more than £275,000 today. “If an individual had invested their full allowance into a stocks and shares ISA each year since 1999 – £7,000 until 2007, £7,200 from 2007 until 2009 and £10,200 in 2010 – they would have invested a total of £87,600,” explains Julie Smith, savings analyst at Fair Investment Company. “Assuming growth of 7 per cent per annum, the gain on this investment would be £50,282, creating a total pot of £137,882. If their partner had done the same, the result is more than a quarter of a million pounds sheltered from the tax man.”
With this in mind and with only 25 days to go until the crucial 5 April deadline, people should be readying their ISA shelter before the tax man’s demands rain down for another 12 months.