By making use of your £20,000 ISA allowance in this, and next, tax year, you will be taking more control over the tax you pay on your future income and capital gains.
The recent rise in interest rates – the first in over a decade – provided little comfort for cash savers. Many banks failed to pass on the increase in full and returns still fall well short of what’s required to keep pace with inflation.
Although the future path of interest rates remains unknown, the political and economic uncertainty increases the likelihood of a ‘lower for longer’ outlook. Markets currently anticipate interest rates reaching 1% by 2020, offering little light at the end of the tunnel for cash savers.
The average no-notice Cash ISA rate is currently just 0.68%¹. There are no Cash ISAs paying a return that beats inflation and figures suggest that more savers are recognising that they are not making the most of their ISA tax benefits. The latest figures from HMRC show that contributions to Stocks & Shares ISAs rose by more than 5.5% to £22.3 billion in the last tax year. Cash ISA subscriptions, on the other hand, fell by a staggering 33% to £39.2 billion.²
As the end of the tax year approaches, individuals yet to use their ISA allowance, or with accumulated ISA savings, need to carefully consider their options to ensure that they are maximising this valuable tax perk.
¹ Moneyfacts, December 2017
² HMRC, September 2017
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. An investment in a Stocks and Shares ISA will not provide the security of capital associated with a Cash ISA.
The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.
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