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March 2021

ISA Deadline 5 April 2021: Use it or lose it!

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Make the most of the tax breaks before it’s too late. If you hold a Cash Individual Savings Account (ISA) you may be dissatisfied with the low rates of interest you receive, which could make it difficult to grow your money even at a rate that keeps pace with inflation.

Stocks & Shares ISAs offer the possibility of higher returns than Cash ISAs, but only if you’re prepared to take some risks with your savings. These investment accounts offer tax-efficient benefits, and while a Cash ISA is simply a tax-efficient savings account which offers capital security, a Stocks & Shares ISA lets you put money into a range of different investments.

Make the most of your ISA allowance

All UK residents over the age of 18 receive an annual ISA allowance of £20,000 (2020/21 tax year). This is the amount you can pay into your ISA (or split between several ISAs of different types) to allow it to grow through interest, capital gains or dividend income, and you won’t pay tax on these proceeds.

Because you can’t carry over your ISA allowance into a new tax year, it’s important to use it by 5 April each year. You need to bear in mind, though, that tax rules can change in future and that their effects on you will depend on your individual circumstances.

Don’t obsess over timing

When getting started, a common concern is that the market will fall just after you’ve made a large investment. Some people make the mistake of trying to ‘time the market’ – buying in just before
prices spike – which, while tempting, is very difficult given the unpredictable nature of investments.

If appropriate, a safer strategy can be to drip-feed money into your Stocks & Shares ISA throughout the year. Sometimes you might buy when the market is high, and sometimes when it is low, but over time the aim is for this to average out.

Time to make your decision

When you set up your Stocks & Shares ISA, you’ll make some decisions about how your money is invested. How involved you are in your investment decisions varies between different ISA providers; some allow you to choose individual investments, while others provide ready-made portfolios.

Either way, your professional financial adviser can explain how funds work. These funds may invest in shares in specific markets, regions or industries, or in bonds, in property, in a combination of these, or in entirely different assets.

Match your investment goals

Funds tend to advertise themselves based on their past performance, so it’s naturally tempting to choose those that have achieved the most growth in recent years. But past performance doesn’t guarantee future performance and outstanding performance last year could be the result of a trend that will self-correct this year. Don’t base your decisions on this factor alone.

Instead, select funds with a stated objective that matches your investment goals in terms of risk and return. Any investment involves an element of risk. But multiple factors can raise or lower the risk level of a fund, including the assets it invests in, the region, industries and companies it invests in, and the way it is managed. Consider all these factors.

Review your investments regularly

Once you have made your investment selections, you should review your Stocks & Shares ISA regularly to make sure it still meets your needs, which may change over time. For example, if you hope to buy a house in ten years, you might initially choose higher-risk investments, but after five years you might want to reduce your risk level to protect your existing capital.

While annual reviews of your investment strategy are wise, more frequent adjustments are not usually recommended. There are many reasons you might be tempted to adjust your investments. You might have heard of a well-performing stock that’s offering unbelievable returns. Or you might have suffered a sudden loss and decide your existing investments are underperforming.

Investments, by nature, fluctuate in value

It’s more helpful to recognise that investments, by nature, fluctuate in value. A sudden rise in one doesn’t mean you should buy and a sudden fall in another isn’t a sign you should sell – in fact, you may recoup that loss quicker by holding it.

Constantly moving funds can be stressful and ultimately unproductive. In most cases, you’re better off sticking with your investments through ups and downs. Diversification (which can be achieved by investing in several unrelated funds) can also help to manage your risk level.

Invest in your future today with a stocks & shares ISA

Amid the mayhem caused by the coronavirus (COVID 19) pandemic, it is easy to forget that the end of the current tax year is approaching on 5 April and that means you don’t have much time left to make use of the tax advantage of your £20,000 ISA allowance. For help selecting funds to suit you, contact us for more information.

Information is based on our current understanding of taxation legislations and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. The value of investments and income from them may go down. You may not get back the original amounts invested. Past performance is not a reliable indicator of future performance.

Budget 2021: Key announcements at a glance

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What was announced in Chancellor Rishi Sunak’s speech?

The Chancellor of the Exchequer, Rishi Sunak, says he would do ‘whatever it takes’ during the pandemic, and that he has done and will continue to do so. ‘It’s going to take this country, and the whole world, a long time to recover from this extraordinary situation,’ he told Parliament.

Mr Sunak said he wants to be honest about the government’s plans for fixing the public finances, and set out plans for the future. These are the key Budget 2021 takeaways announced from his Budget 2021 speech on 3 March.

Economy

  • UK economy contracts by 10% in 2020
  • Chancellor forecasts a ‘swifter and more sustained’ recovery
  • 700,000 people have lost their jobs since the coronavirus (COVID1- 9) pandemic began
  • Unemployment expected to peak at 6.5% next year, lower than 11.9%previouslypredicted

Growth

  • Economy set to rebound in 2021, with projected annual growth of 4% this year
  • Economy forecast to return to pre-COVID levels by middle of 2022, with growth of 7.3% next year

Borrowing

  • UK to borrow a peacetime record of £355 billion this year
  • Borrowing to total £234 billion in 2021/22
  • Debt levels set to peak at 97.1% of GDP in 2023/24

Personal taxation , investments and pensions

  • No changes to rates of Income Tax and National Insurance (CPI rise from April 2021)
  • Personal Income Tax allowance to be frozen at £12,570 from April 2022 to 2026
  • Higher Rate Income Tax threshold to be frozen at £50,270 from 2022 to 2026
  • No changes to Inheritance Tax or Lifetime Pension Allowance or Capital Gains Tax allowances until April 2026
  • Adult Individual Savings Account (ISA) annual subscription limit for 2021/22 remains unchanged at £20,000
  • Annual subscription limit for Junior Individual Savings Accounts UISAs) and Child Trust Funds for 2021/22 remains unchanged at £9,000
  • The government has maintained the Lifetime Allowance at its current level of£1,073,100 until April 2026

Coronavirus (COVID-19)

  • Extension to Coronavirus Job Retention Scheme (CJRS) u ntil the end of September
  • 80% of employees’ wages to continue to be paid by the government for hours they cannot work
  • Employers will be asked to contribute 10% in Jul y, 20% in August and 20% in September, as the economy reopens
  • Support for the self-employed extended until September
  • 600,000 more self-employed people will be eligible for help as access to grants is widened
  • Working Tax Credit claimants will get £500 one-off payment
  • Minimum wage to increase to £8.91 an hour from April
  • £20 increase in Universal Credit worth £1,000 a year to be extended for another six months

Housing

  • Stamp Duty Land Tax (SDLT) holiday on property purchases in England and Northern Ireland extended to June, with no tax liability on sales costing less than £500,000

Transport, environment and infrastructure

  • Leeds will be the location for a new UK Infrastructure Bank
  • The new UK Infrastructure Bank will have £12 billion in capital, with the aim of funding £40 billion worth of public and private projects
  • £15 billion in green bonds, including for retail investors, to help finance the transition to net zero by 2050

Health

  • £19 million announced for domestic violence programmes, funding a network of respite rooms for homeless women
  • £40 million of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee
  • £10 million to support armed forces veterans with mental health needs
  • £1.65 billion to support the UK’s COVID vaccination rollout

Nations and regions

  • First eight sites for Freeports in England announced
  • £1.2 billion in funding for the Scottish government, £740m for the Welsh government and £41Om for the Northern Ireland executive

Other announcements

  • Duties on all alcohol frozen for a second year
  • No extra duties on spirits, wine, cider or beer
  • Eleventh consecutive year fuel duty to be frozen
  • £100 million to set up an HMRC taskforce with 1,000 investigators to tackle fraud in COVID support schemes

Business

  • Corporation Tax on company profits set to rise from 19% to 25% in April 2023
  • Corporation Tax rate to be kept at 19% for companies with profits of less than £50,000
  • Tax breaks for firms to ‘unlock’ £20 billion worth of business investment
  • VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2022
  • VAT rate for hospitality firms to be maintained at reduced 5% rate until September
  • Interim 12.5% VAT rate to apply for the following six months
  • Firms will be able ‘deduct’ investment costs from tax bills,reducing taxable profits by 130%
  • Incentive grants for apprenticeships to rise to £3,000 and £126 million for traineeships
  • For firms in England, the business rates holiday to continue until June followed by a 75% discount
  • £5 billion in Restart grants for shops and other businesses that closed due to COVID
  • £6,000 grant for premises for non­ essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses
  • New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas
  • Contact less payment limit will rise to £100 later this year
  • Review of the current 8% bank surcharge to make sure the sector ‘remains internationally competitive’

For a more detailed insight, download our Guide to Budget 2021