SAVING

The ISA season: a financial adviser’s perspective

  • Leanne Lancaster
  • 24 January 2025
  • 5 mins reading time

The period from March to April is crucial for savers, known as the ISA season. This is the time when individuals are encouraged, where they can afford to, to maximise their tax-free Individual Savings Account (ISA) allowance before the current tax year concludes and the new one begins.

For the tax years 2024/25 and 2025/26, the maximum amount you can save in an ISA is £20,000. This allowance resets annually on April 6th, and the total limit applies regardless of the number of ISAs you hold.

As the tax year draws to a close, taking advantage of your ISA allowance can be a wise choice. Clare O’Malley, Personal Wealth Adviser at SPW, shares some important considerations when it comes to utilising your ISA.

Clare, before we begin, can you tell me a bit about yourself?

I've been working in Financial Services since 1988, starting as a summer job before university, and have been in an advisory role since 2013. I love my job because it's truly humbling to meet clients, create strategies that meet their needs, and ensure their families are protected. Building strong relationships with clients is at the heart of what I do.

On a personal note, my daughter has just bought her first flat, keeping me and her dad busy with odd jobs, and I have two princess spaniels who believe the household revolves around them.

And could you tell me a bit about what you get up to in terms of supporting clients during ISA season?

The months of March and April are extremely busy ones for me as I look to support my clients with taking full advantage of their ISA allowances in the current tax year as well as making plans for the new tax year, ensuring that they understand their options and any key changes that might impact those plans.

For those who aren’t familiar with ISAs could you please tell us a bit about the different types and the benefits associated with them?

Certainly, there are several different kinds, each with different benefits.

Starting with Cash ISAs, probably the most familiar to a lot of people,where you can save without paying tax on the interest. They’re low-risk and ideal for secure, accessible savings. There are different types that have different rules; for example, fixed-rate ISAs may offer higher interest than other cash ISAs but lock your money for a set time effectively meaning you can’t withdraw without incurring penalties.

Moving on to Stocks and Shares ISAs where you invest in shares and other assets without tax on gains or dividends. They carry higher risk since your investment value can fluctuate, and you might get back less than you put in and are a long-term solution to saving.

There are Lifetime ISAs (LISA) available for first-time homebuyers or retirement savings, available to those aged 18-40. You can save up to £4,000 a year with a 25% government bonus (up to £1,000 annually). Withdrawals from a LISA are tax-free for a first home or after age 60, but other withdrawals incur a 25% penalty.

Finally, there are Junior ISAs (JISA), these come in both Cash and Stocks and Shares options.They are tax-efficient savings for children under 18, that are managed by parents or guardians. The allowance is £9,000 a year, which doesn’t count towards the adult’s £20,000 ISA limit. With these products the child can take control at 16 but can’t withdraw until 18, when it becomes a regular ISA.

In my role as a Personal Wealth Adviser for Schroders Personal Wealth I focus on long-term solutions for my clients, this means we advise and support on both Stocks and Shares and Stocks and Shares Junior ISAs.

Thanks Clare, with that in mind can you tell me a bit about the key benefits of a Stocks and Shares ISA?

Well, one major perk is that you don't pay any tax on the profits you make from your investments within a Stocks and Shares ISA. Normally, if you invest outside of an ISA, you'd have to pay tax on any gains over £3,000 for the 2024/25 and 2025/26 tax years.

Another benefit is that dividends earned within an ISA are completely tax-free. Outside of an ISA, you'd pay tax on dividends over £500 for the 2024/25 and 2025/26 tax years.

The rates you pay on dividends depends on your individual income tax band.

And now what about the benefits of a Junior Stocks and Shares ISA?

A Junior Stocks and Shares ISA offers a tax-efficient way to invest for your child's future. Any gains or dividends earned within the account are completely tax-free, which can significantly boost the overall returns.

Plus, the annual contribution limit of £9,000 doesn't count towards the parent's own ISA allowance, allowing for more flexible family savings. This makes it an excellent option for long-term growth potential, helping to provide a financial head start for your child.

Additionally, family members can pay into the account on behalf of the children meaning that money received as birthday and Christmas gifts could be put towards your child’s future.

Finally, what would your advice be to someone who is considering starting investing into a Stocks and Shares ISA whether for them or their children?

Get started with whatever you can manage each month.

You don't need a huge sum to get started. The important thing is to begin early so your investments have time to potentially grow and benefit from compounding. This is when earned interest starts earning interest itself.

By setting up regular monthly contributions to an ISA, you can take advantage of 'pound-cost averaging,' which helps mitigate market volatility as you average out the cost of investing. This strategy reduces the risk of making a large investment when a market is at its peak and allows you to buy shares at lower prices during market dips.

And remember, you can fund your ISA at any point during the year, you don’t need to wait until tax year end if you like to be prepared.

At SPW we have over 300 Advisers like Clare, across the UK, who are ready to help you understand if investing could aid the long-term goals of both you, and your family. It all begins with a free, no obligation conversation. There are no hidden fees or charges, and clients only pay if they choose to go ahead with the recommendations in their personalised financial plan – you can book a call today through our website to see how SPW could support you.

Important information

This article is for information purposes only. It is not intended as investment advice.

The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors might not get back their initial investment.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Let's start with a free initial consultation

We'll begin with a free, no obligation conversation to understand if our service is right for you. There are no hidden fees or charges, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.

Read our latest financial insights