The popularity of the different ISAs (Individual Savings Accounts) changes often, as people are constantly looking for the most competitive place to save their money. Alongside this, the rules surrounding ISAs changes often also.
The reason why many people save into an ISA is because of how tax efficient they are. This is because you don’t pay any income tax or any capital gains tax on the returns. However, each year you have a limit to how much you can save into an ISA account, due to these tax benefits.
For this new tax year, 2019/20, the main annual allowance for ISAs hasn’t increased. Therefore, the total amount you can save into an ISA remains at £20,000. Interestingly this allowance hasn’t increased since April 2017.
Be sure to note that not all ISAs have the same saving allowance. An example of this is the Lifetime ISA, whereby you can only save £4,000 per year. Whereas, the Help to Buy ISA you can save up to £200 a month on top of your initial £1,200 deposit.
The allowance for the Junior ISA has increased from £4,260 to £4,368 this tax year. This will allow family members to contribute a little bit extra into the child’s account. During the 2017/18 tax year there was around £907,000 Junior ISAs subscribed to.
Nearly 250,000 additional people opened a Stocks and Shares ISA in the 2017/18 tax year. However, there has been a recent drop in the number of adult ISA accounts subscribed to. During the 2016/17 tax year there was 11.1 million which fell to 10.8 million in 2017/18.
Brexit uncertainty will have created some concern for investors who have a Stocks and Shares ISA. If this is the case for you, make sure your investments are properly diversified around the globe. Be sure to speak to your financial adviser if you do have concerns about your investments.
For more information on ISAs read our factsheet here.
Reference – BL064 – May – 2019