We explain what the new ISA Allowance is for 2017/18 and how it can benefit you.
ISA allowance: £20,000
Junior ISA allowance: £4,128
Individual savings accounts (ISAs) have remained one of the simplest ways to save and invest in a tax efficient manner since they were first launched 18 years ago. Each year, ISAs are reviewed by the government, in order to ensure that the products on offer are meeting the needs of savers in the UK. This review includes the opportunity to develop new products, but also to make changes to existing ISAs, including the amount that you can pay in over the course of a tax year.
This amount is known as the ISA allowance. Back in 1999, the ISA allowance was £7,000 and it has increased every year since. As of 6th April 2017 your new ISA allowance will be £20,000. The reason that the ISA allowance has been raised consistently each year since its introduction is to keep pace with the Consumer Prices Index (CPI); the rate at which the cost of living in the UK gets more expensive. Your ISA allowance is your personal tax efficient annual savings allowance, so if the cost of living was increasing but your tax efficient savings allowance wasn’t, then in real terms the value of the money you could invest in an ISA would be reducing each year.
Can I have more than one ISA?
You can have a cash ISA or a Help to Buy ISA at the same time as a stocks and shares ISA. You can then split your ISA allowance between the two in any way you want. You can also have two or more of the same types of ISA (stocks and shares or cash at any one time, but you can only pay into one stocks and shares ISA and one cash ISA in the same tax year.
How much can I open an ISA with Shepherds Friendly with?
The minimum monthly payment is £30 a month, which can be increased at any time by a minimum of £10 a month. Once the ISA is opened, monthly payments into the plan are not required, and you can change what you pay in when you like. The minimum initial lump sum invested is £500, and additional lump sum investments of at least £100 can be made at any time.
Do I have to keep paying in?
No, we understand that your circumstances can change, that is why it’s a flexible plan which means you can add how much you like, whenever you like, as long as the total invested within that year is not over the annual ISA allowance. You have the option of making regular monthly payments by setting up a monthly Direct Debit starting from £30 or more a month, or paying in lump sums.
Related: What is a Stocks and Shares ISA?
Opening an ISA for a child
At one time, ISAs were only for adults but now Junior ISAs are available to help save for younger generations’ futures. The new Junior ISA allowance will be £4,128, allowing you to save more on behalf of your child.
Shepherds Friendly Junior ISAs can be opened from as little as £10 a month, or with an initial lump sum of £100. Your child will be able to access the money as a tax-free lump sum on their 18th birthday, or they can choose to transfer it to an adult ISA.
Related: What is a Junior ISA?
Money.co.uk discovered that 28% of parents admitted that saving wasn’t an option as they looked at it as a luxury they cannot afford. However, saving £10 a month would be similar to buying a new toy for your child, and saving £30 a month would be similar to buying a cup of coffee every day before you go to work. Prioritising what is more important is a great way to help you manage your money and make it go further, for things that matter the most.
The boost in the allowance is a welcome move which will prove useful for those who wish to save more for their own and a child’s future, tax efficiently.