With the end of the tax year fast approaching, savers are encouraged to maximise their ISA contributions to enjoy a host of tax reliefs and benefits. Mark Norman explains how to make the most of your ISA before 6th April.

5th April marks the end of the 2023/4 tax year. While this is good in terms of refreshing your allowances and allowing you to start the new financial year with a clean slate, the short window between now and then offers savers a vital opportunity to make significant tax savings.

In any given tax year, savers can invest up to £20,000 in their ISA – which benefits from being free from income tax and capital gains tax. However, this allowance is fixed and does not roll over into the new tax year. 

If you’re yet to invest your maximum contribution, I’d encourage you to do so quickly because if you don’t use your allowance, it’s gone!

As well as topping up your annual savings, you can also benefit from further allowances that extend the benefits of your ISA – in some cases, across your entire portfolio of assets. Here’s how:

Double up your allowances with spousal support

Married couples benefit from double the standard ISA allowance, meaning you can invest up to £40,000 between you. Make sure to check whether your other half has saved as much as possible to maximise the tax benefits to your household. 

Similarly, children can save up to £9,000 annually in a Junior ISA account, so it pays to use this full allocation where possible. 

If your child is 17 years old, or approaching that age, bear in mind that they are in the unique position of being able to contribute to a Junior ISA and a full adult ISA once they turn 18. Unless their birthday happens to fall on April 6th, they could benefit from saving £29,000 in just one year.  

ISA gains are tax-free

Unlike products liable to Capital Gains Tax (e.g. those investments not in a tax wrapper), ISA gains are tax-free. Remember, Capital Gains Tax reliefs are diminishing rapidly. From £12,300 in 2022/23 to £6,000 2023/24 and just £3,000 in 2024/25, savers are seeing a reduced allowance – which means they will be liable to pay more tax on assets sold. 

In stark contrast, all ISA gains are entirely tax-free, so it pays to max out your contributions when you can. Of course, while gains are tax-free, the content of your ISA itself isn’t. This will form part of your estate, so be careful not to misconstrue savings as gains.

Enjoy flexible savings by reinvesting in your ISA

Use, don’t lose your savings allowance. If you have funds invested elsewhere, it may pay to withdraw your money and then reinvest in your ISA. Always make sure to check the savings yield on the account these funds come from however, as some accounts (such as a flexible saver account) offer varying levels of interest based on your withdrawal history – so this should be checked on a case by case basis. 

Cash is not always king, but should you have the funds, you have the option to open a cash ISA and then switch to a share ISA in the future, which can help you to maximise contributions to ensure you don’t lose your allowance. 

Use your ISA to protect your portfolio

Your ISA is a valuable tool that can be effectively used to safeguard your portfolio of assets – if used correctly. Build your income-producing portfolio to be more tax-efficient by investing funds in your ISA, as income and dividends are then tax-free.

Remember, spouses inherit their partner’s ISA portfolio on passing, so it’s important to always ensure your assets are accurate and current.

If you’d like to know more, get in touch today to use your ISA allowance before you lose it on April 6th.