Start thinking about how you can best use your ISA allowance before the 5 April deadline
You can protect up to £20,000 from tax across several types of ISAs in 2019/20. And you can usually reinvest any interest and dividend income from your savings and investments too.
In other words, the sooner you start paying into an ISA, the sooner you could make use of your full allowance.
This is especially important if you’ve used up your pension allowances or need to access your savings and investments before age 55.
How to make the most of your ISA allowance
The ISA allowance is a ‘use-it-or lose-it’ tax-saver because if you don’t use your full £20,000 allowance, it’s gone for good.
So, how can you make full use of your allowance?
Cash ISA interest rates are still very low, but marginally better compared with this time last year. The best instant access ISAs pay around 1.44% 1.
However, that’s only enough to turn a £5,000 saving into £5,072.
If you’re prepared to lock your money away for five years, you can get around 1.95% 2.
But that’s still only enough to turn your £5,000 into £5,097.50.
You probably want the potential for higher returns than that.
In that case, consider a stocks and shares ISA. They can offer higher returns in a year of strong performance.
For instance, our medium to high risk growth Stocks & Shares ISA returned 4.89% in 2018/19, 3.58% in 2017/18 and 13.27% in 2016/17. That’s much higher than a cash ISA. And the last example would have been enough to turn your £5,000 investment into £5,663.50 in one year:
Other providers, like Wealthify, could offer you impressive returns too. Their ‘adventurous’ Stocks and Shares ISA has returned 3.42% in 2018/19. 5.32% in 2017/18. 13.77% in 2016/17.
Again, that last example would have been enough to increase your £5,000 investment into £5,688.50. That’s extra profit you could reinvest into your ISA to go towards your allowance.
Of course, past performance isn’t a reliable indicator of future performance. All investments carry risk and you could get back less than you put in, so make sure you consider all your options.
Looking ahead to this November, the government will announce if your ISA allowance for 2020/21 will be even higher than £20,000.
Make the most of your ISA allowance today
Don’t wait until the April 5 deadline to start paying into an ISA. The sooner you pay in to an ISA today, the sooner you can reinvest any potential returns and build up any potential investment gains.
We’ll show you two different stocks and shares ISAs you can put your £20,000 towards.
One is our own Stocks and Shares ISA.
You can pick from our ready-made funds built by expert investors from Aviva. Or you can pick your own from our handpicked shortlist of 70 funds. Or there’s the full funds range if you feel confident enough to pick them yourself.
You can also take an Investment ISA through our partner, Wealthify.
Their Investment ISA does all the hard work for you by putting your money into passive investment funds. You simply tell them your investor confidence level and their experts will present the best plan suited for you.