Use it or lose it!

Have your clients used their annual ISA allowance?

Individual Savings Accounts (ISAs) were launched in 1999 and have become one of the most popular saving tools for investors at all stages of investing whether saving for a first home or for retirement. 11.2 million adults subscribed to ISAs in 2018-19, up from 10.1 million the year before (Source: HM Revenue & Customs).

So why are so many people interested in ISAs?

There are several benefits of using an ISA allowance.

Subscribers can invest up to £20,000 each year, free from income and capital gains tax on investment growth. In addition to this, ISAs benefit from instant access, which is particularly useful for those who do not want to lock away their savings using other methods such as through a pension. ISAs can be held on platform which allows investors to take advantage of wider investment options. This explains why ISAs are one of the most popular ways for retail investors to benefit from tax-efficient investing.

How can ISAs help my client’s intergenerational tax planning?

The tax year for 2020/2021 will end on 5th April at which point next year’s allowance will apply and any allowance not used from the previous year will be lost.

We have heard from advisers that many clients are reluctant to invest due to uncertainty stemming from the current market environment. The tax incentives for an ISA investor can give an extra level of incentive which goes a long way to reassure clients on whether subscribing into an ISA before this year’s cut off is a sensible decision to make. Furthermore, it is not necessary to invest the ISA subscription immediately and cash can be held on account if clients are reluctant to commit to the stock market at this point.

Investing in rapidly growing companies on AIM

Since 2013 ISAs have been permitted to hold shares in companies listed on AIM.

AIM has developed into one of the most successful growth markets in the world, with the AIM index significantly outperforming the main UK stock market over recent years.

The shares of qualifying AIM companies can also benefit from 100% relief from Inheritance Tax, offering a further tax planning attraction.

Making sure clients are taking advantage of their annual ISA allowances is one of the best methods for a client to protect their legacy in a tax efficient way for the next generation.

Derek McLay

Business Development Manager

Fundamental Asset Management Ltd.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.