Act now to make the most of your new ISA allowance

The new tax year begins on 6th April 2022, bringing with it a brand new ISA allowance that allows you to shelter more of your money from income tax and capital gains tax.

For the 2022/23 tax year, the ISA annual subscription limit is once again £20,000. If you’re a couple, this means you can invest up to £40,000 in ISAs to benefit from tax-efficient income and growth. You can also invest up to £9,000 in a Junior ISA to save tax-efficiently for your child’s future.

The sooner you act, the better
Many people delay until the last minute to maximise their ISA allowance, but planning early could increase your chances of realising your financial goals. Although the stock market goes up and down, investing early will give your investments the opportunity to produce tax-free returns over a longer period.

This is particularly important in a low interest rate environment. Money in bank and building society accounts may be achieving little or no real growth. In fact there is a risk your money will lose its real value over time as inflation erodes its purchasing power.

History shows us that stock markets, although volatile, have delivered better returns than cash deposits over the long term and investing in the stock market offers the potential for above-inflation returns, helping you to grow your money in real terms.

The power of ISA investing
Investing through an ISA means that your investments can grow free of tax. If you hold investments outside of an ISA, you will pay Capital Gains Tax (CGT) at up to 20% on the profits (‘gains’) you make above your CGT exemption, which is £12,300 for the 2022/23 tax year.

If your investments generate income – for example, dividends from shares or interest from bonds – this is also free of personal income tax when inside an ISA. In contrast, income from investments held outside an ISA may be subject to income tax.

No time like the present
When it comes to maximising your new ISA allowance, there is no time like the present and the ISA allowance is a ‘use it or lose it’ allowance, so taking advantage of it earlier in the tax year means you won’t face any last-minute decisions when April 2023 approaches.

Remember, children can also benefit from the new tax year, thanks to the £9,000 Junior ISA allowance. Money inside a Junior ISA is locked away until the child’s 18th birthday, when it could provide them with a substantial head start in their journey as a financially independent adult.

If you would like to discuss any of the issues raised in this article or any other financial planning matter, please do not hesitate to contact us on 0114 2588899 or email Our Independent Financial Advisers are qualified to provide advice in the areas of retirement planning, tax planning, savings, inheritance tax, investments and protection. Please remember that the value of investments, including those in a stocks and shares ISA may fall as well as rise in value.