Use it or lose it

Taking full advantage of ISA allowances will help reduce your tax bill this year and in 2016

19 November, 2015 / management

In our opinion, the only reason you wouldn’t utilise your ISA Allowances is if you didn’t have the money at hand to do so. The government offers generous tax breaks to encourage people to save and an ISA is still one of the most popular and accessible.

The best way to think of an ISA is as a “wrapper” into which you can shelter your savings and investments from tax.

Within a Stocks & Shares ISA, you pay no Capital Gains Tax and no further tax on income and you don’t need to declare an ISA on your tax return. ISA allowance for 2015/2016 is £15,240, so a couple can invest over £30,000 each year and shelter all gain and income from the tax man.

Where you invest will depend very much on timescale, investment expectations and appetite for investment risk. Within an ISA wrapper, you can invest in as low or high risk a manner as you like and can choose cash, fixed interest, commercial property, or UK & Global equity to diversify your investment strategy to match your investment goals.

What did we learn from the pensions revolution?

On 6 April 2015, a number of significant changes were made to pensions with regard to contributions, withdrawal of funds and death benefits. Pension contributions are subject to a £40,000 Annual Allowance for most people, providing you have earnings up to this level. A new £10,000 Annual Allowance has been introduced for people who have flexibly accessed their pension.

Most pension investors, aged at least 55, now have total freedom on how they take income and/or lump sums from their pension funds. Previously, it was normally only possible to pass a pension on as a tax-free lump sum if you had died before the age of 75 without having taken any tax-free cash or income.

There are now no restrictions on where lump-sum death benefits are paid from a money purchase pension fund and there is no limit on the number of successors, so, in theory, funds could be passed on for generations to come.

Tips for 2016

It may be in your best interests to ensure that any unused ISA Allowances are utilised before 5 April 2016 and, where possible, 2016/2017 allowances are utilised after 6 April.

We would strongly recommend that any money-purchase pension, stake-holder pension, personal pension, SIPP, or executive pension is reviewed in light of the new pension freedom legislation, as not all providers will facilitate all the new flexible options. It is imperative that your pension Expression of Wishes is regularly reviewed and updated.

It is strongly recommended that Independent Financial Advice is taken when considering an ISA investment or a review of pension arrangements, as personal circumstances, needs, priorities, appetite for risk and inheritance tax liabilities will be unique.

Looking for further tax-saving ideas and planning tips?

If so, look no further than our Tax Planning for Life guidebook for year ending 5 April 2016. You can find it on the home page. Tax-saving ideas for individuals, married couples/civil partnerships, business and working life, investments, pensions and some forewarnings based on recent announcements in the 2015 Budgets.

The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice. Martin Aitken Financial Services Ltd are authorised and regulated by the Financial Conduct Authority. This is based on our understanding of current HMRC rules and guidance which may be subject to change.

About the author

Alasdair MacDougall is a director at Martin Aitken Financial Services Ltd. To contact Alasdair, email

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