Use that Isa allowance NOW

TAX-friendly Isas weren’t given a mention in Sunak’s Budget – and thankfully there were no sneaky changes hidden away in the swathe of supporting documents.

It means anyone aged 18 or over can continue to invest or save a maximum of £20,000 per tax year inside an Isa. Money within the plan grows tax-free and it can be withdrawn at any time without any tax charge. The Isa can be cash based or invested in shares and funds.

For under-18s, there is a Junior Isa for which the maximum annual contribution is £9,000. For those aged 16 and 17, they can contribute to both a cashbased Isa and a Junior Isa – a potential maximum annual contribution of £29,000. Ben Yearsley, a director of Shore Financial Planning, says investors should try to use their Isa allowance. ‘It’s a generous annual allowance,’ he adds, ‘and it wouldn’t surprise me if it got cut further down the line. Use it if you can. It shelters your investments from income tax and capital gains tax.’ Over the next five weeks, he says investors could squirrel away £40,000 in Isas if they had sufficient funds – £20,000 in the current tax year and £20,000 in the tax year starting April 6.

Becky O’Connor, head of pensions and savings at Interactive Investor, says those close to their pension lifetime allowance may prefer to contribute to an Isa rather than continue paying into a pension and face a possible future tax hit. She adds: ‘You don’t get tax relief on the way in, but you can take tax-free income from the Isa.’