Making the most of your ISA allowance

MoneyPlus Features Team

We’re almost half way through the tax year, which means you’ve still got time to make the most of your remaining tax-free allowances.

Individual Savings Accounts (ISAs) offer generous tax benefits. As well as your yearly allowance (up to £20,000 each tax year), any investment growth in a Stocks & Shares ISA is tax efficient. You also don’t pay any income tax when you take money out of an ISA. So now could be a great time to make good use of that yearly allowance and consider saving more into yours.

Why now could be a good time to save more into a Stocks & Shares ISA

Generally you’ve got more opportunity to get better long-term returns from a Stocks & Shares ISA as your money is invested. This is particularly true at times when interest rates are low – and there have been record lows in recent years. 

Investing also helps limit the effects of inflation on your money. So if you’ve got any extra cash sitting around after lockdown, inflation could eat away at it year on year. Leave it there longer than five years or so and it’s likely to lose value when you take inflation into account. So investing is a way of giving your money the chance not only of maintaining its value but also the potential to grow in value. 

You can use our ISA calculator to give you an idea of how much your ISA could be worth in the future.

Remember, there aren’t any guarantees with investing and the value of investments can go down as well as up, and you may get back less than you paid in.

Why being invested can still be a good thing 

It’s understandable that in the current environment you might be left feeling a little hesitant about investing. But there are some important reasons why it might still be right for you. You can find out more by reading Why investing could still be right for you.  You might even find that now could actually be a good time to pay in a bit more and help boost your ISA savings.

Where can you invest your money?

Different Stocks & Shares ISAs offer different investment options, so it’s worth  and making sure those choices still right for you and your financial goals. Funds are the most common type of ISA investment, but some ISAs also let you invest direct in stocks and shares, and bonds. 

Tips to help you choose the best investments for you

• Think about how much risk you’re prepared to take

The more risk you take, the more potential you have for higher returns. But on the flipside, there’s more of a possibility that the value of your investments will go down, particularly in volatile markets.

Thinking about when and how you’re planning to use money from your ISA in the future may help you decide how much risk you’re happy taking. In turn, this can help narrow down your choices.

If you’re not sure how you feel about risk, try our risk questionnaire

• Consider ‘ready-made’ funds

These usually include a mix of investment types and are designed to take the hard work out of investing. The good news is experts will manage them on your behalf (charges may apply). So if you’re new to investing or want to save time choosing your own funds then this could be an option to look into.

• Think carefully before following the herd or going for the latest trend

You might see certain funds mentioned a lot in the press or on social media. That doesn’t mean they’re necessarily the best choice for you.

Look carefully at your options and make sure that where you are invested is aligned to your goals in saving into your ISA and what level of risk you’re willing to take.

• See what the experts are saying

Many investment companies have teams which analyse markets and give their views on the outlooks for different types of investments.

Aberdeen Standard Investments’ Head of Multi-Asset Research, Richard Dunbar, gives us a snapshot of this every month in his Market Outlook.

• Use your ISA’s cash account

Most Stocks & Shares ISAs also have a cash account, so you can keep your money there until you’ve decided where to invest it. Keep in mind that any money sitting there misses out on the opportunity to gain investment growth. 

So, give yourself plenty of time ahead of this year’s tax year end deadline on 5 April 2021 if you want to save more make the most of your ISA allowance.

You can find out more about Standard Life’s ISAs on our website, or if you want to check or pay more in to your existing Standard Life ISA, you can log in here. Alternatively, to open a Standard Life ISA, click on the button below.

Open an ISA

Please remember that the value of your investment can go down as well as up and may be worth less than you paid in. Laws and tax rules may change in the future.

Personal circumstances also have an impact on tax treatment.

The information here is based on our understanding in September 2020 and should not be regarded as financial advice.