Individual Savings Accounts (ISAs) are tax-efficient savings and investment accounts that offer a range of advantages to individuals who wish to grow their wealth
ISA allowances are an important aspect of managing how you use these accounts.
Therefore, a reminder to utilise ISA Allowances is often issued in February or March to coincide with the end of the tax year fast approaching on 5 April. However, it is never too early to contribute for the current tax year 2024/25 as soon as practicable rather than leaving it until February or March of the following year so that the funds are in an income tax-free environment.
With interest rates at around 5%, £20,000 in an interest-bearing account could generate £1,000 interest. For a basic rate taxpayer, this is not a problem as the first £1,000 of interest is tax free. However, for those paying 40% tax, only the first £500 is tax free, and for those with income more than £125,140, all interest is taxable at 45%. So potentially, £500 @ 40% = £200 or £1000 @ 45% = £450 is payable. Although this may seem like “small beer” to many, if you repeat this exercise over several years, the tax can soon become a significant number!
Please feel free to contact us so we can explain how you can make best use of your ISA allowances.
