Tax-free saving helped make me a millionaire . . .
DAVID CHARLES is now a millionaire, thanks to the Isa.
By using his tax-free savings allowance every year for the past 20, the 62-year-old from Berkshire has amassed a fortune of £1.1 million.
Since the Nineties, David, who is married to Frances, 60, has used tax-free accounts to invest £ 250,000 in the stock market.
For five years before the launch of the Isa, he used Personal Equity Plans (Peps), a government-backed tax-free account allowing investors to buy shares in UK companies.
When the stocks and shares Isa replaced Peps in 1999, it became a vital tool in shielding David’s savings from punitive taxes.
On top of his initial £250,000, he has now earned £290,000 in dividends and £560,000 from lucrative investments.
David, an experienced investment banker, uses his annual tax-free allowance every year to purchase shares through investment platform AJ Bell.
He used to pick the shares himself, but now he leaves it to fund managers.
As a higher-rate taxpayer, without the shelter of the Isa’s tax-free status he would be liable to pay 32.5 pc tax on the dividend income he earns and 20 pc tax on any capital gains, after his allowances were taken into account. David quickly caught the bug after watching his father manage his own savings and investments.
He says: ‘It got me thinking about saving, investing, capital growth and dividends and the importance of setting aside money for the big purchases, such as a house deposit.’
It is a mindset he is keen to pass on to his children, Piers, 21, and Tara, 19.
He says: ‘My daughter and son are both students, so they don’t pay tax, but I have already started them off with their own Isas.
‘My advice to people who may not be taxpayers at the moment, but think they will be at some point in the future, is not to wait.
‘Make use of your tax-free allowance now, because you will never get it back.’