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Making Allowances - ISAs

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3 March 2014

Regardless of your financial position, the simplicity, accessibility and tax-free status of
ISAs can be enjoyed by all.

Two years ago, Junior ISAs were introduced to the market. In a bid to encourage people to start thinking about savings earlier, the concept was targeted at younger generations
as a home for their children’s capital – including gifts from family and friends – that
would be almost completely protected from the taxman.

The annual allowance for Junior ISAs for 2013/14 is £3,720. Within this, the account owner (not necessarily the person paying in) may combine cash with shares, but they can only access the funds on or after their 18th birthday, making them popular for encouraging saving for university or perhaps stepping on to the housing ladder.

The benefits of income tax mitigation on the interest you earn are clear to see but they’re certainly not as obvious as they once were. Unfortunately, in today’s economic environment, with its low interest rates and higher inflation, the amounts invested in straightforward cash ISAs are likely to be eroded over time.

Opportunities for Gains

Against that setting, more and more investors have been turning their attentions to Stocks & Shares ISAs. Also a tax shelter, the additional risk taken in the underlying investments can present the opportunity for potential additional gain.

Of course, this is never guaranteed, and whilst equity markets have largely outperformed cash, it can come at a cost.

Attitude to Risk

Understanding the level of risk you are comfortable with is perhaps the most important element in our investment process. We use client-focused and psychometric based tools that help us understand the risk you are willing to take with your capital, so you feel at ease with the decisions made.

Hazlewoods Financial Planning would discuss your objectives and your attitude to risk and make recommendations with this in mind.

Once you decide whether a Cash or Stocks & Shares ISA might be more suitable for your needs, you can work out if you wish to split your allowance - £11,520 for the tax year 2013/14 - between the two versions and if you would rather invest a monthly amount or use a lump sum as a new tax year beckons.

Hazlewoods Financial Planning

Hazlewoods Financial Planning specialises in investment management and for further information on ISAs and other investment options, please contact Gary Cook (gary.cook@hazlewoods.co.uk or 01242 680 000).