With the end of the tax year fast approaching, here’s a quick rundown of the ISA rules you need to know:
How much can I invest in an ISA?
You can invest up to £20,000 in an ISA in the current tax year that ends on April 5th.
You can only invest in one Stocks & Shares ISA in each tax year.
If you’ve already invested in a Cash ISA this tax year, or plan to do so, you’re limited to investing a total of £20,000 across both ISA types.
So if you put £5,000 in a Cash ISA, the most you can invest in a Stocks & Shares ISA this tax year is £15,000.
When is the deadline for investing in a 2020/21 ISA?
The final deadline for investing in a 2020/21 ISA is April 5th.
But some ISA companies may have earlier deadlines for receiving your money, especially as April 5th this year is Easter Monday.
However, at InvestEngine you can invest in an ISA right up until 6.30pm on April 5th.
What if I don’t use my £20,000 ISA allowance by April 5th?
With your annual ISA allowance, it’s “use it or lose it”. If you don’t use your 2020/21 allowance by April 5th, then it’s gone — you can’t carry it forward to use later.
So if you don’t invest in an ISA at all this tax year, you’ve lost your £20,000 tax-free allowance for 2020/21.
And if you only invest £5,000 in an ISA but don’t use the remaining £15,000 of your allowance, then that £15,000 can’t be used later.
However, you will get a new £20,000 ISA allowance for the 2021/22 tax year that starts on April 6th (unless the rules change).
So if you’ve invested in an ISA in 2020/21, you can also invest up to a further £20,000 tax-free in 2021/22.
And if you miss the boat in 2020/21, you can still invest tax-free from April 6th.
Why should I invest in an ISA?
Investment returns from ISAs are tax-free!
This means you pay no income tax or capital gains tax (CGT) when your investments go up in value or if they earn interest or dividend income.
Without an ISA, investors’ returns can be significantly reduced by tax.
Who can invest in a Stocks & Shares ISA?
Anyone aged 18 or over can invest in a Stocks & Shares ISA, provided they are resident in the UK (or a diplomat or similar if they don’t live in the UK).
How can I invest in an ISA?
Opening a Stocks & Shares ISA with InvestEngine is easy.
Simply visit our website and click on ‘Get started’ to find an investment portfolio for your needs.
First, choose whether you want a portfolio that pays out income or that invests for longer-term growth.
Then complete our short online questionnaire so we can suggest a portfolio based on your investment profile.
Want the opportunity of higher returns and are comfortable taking more risk? The portfolio we suggest is likely to have a higher weighting in shares.
Or are you more of a cautious type? We’re likely to suggest more bonds.
Our portfolios consist of varying combinations of shares, bonds and alternative assets such as gold — which we invest in via exchange traded funds (ETFs) to provide wide diversification at very low cost.
Our management fee of just 0.25% a year is one of the lowest around — helping you keep even more of your portfolio’s investment returns.
Capital at risk. Eligibility to invest in an ISA depends on personal circumstances. ISA rules apply. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply. Tax treatment depends on personal circumstances and may be subject to change
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.