By effectively leveraging ISAs, you can enhance your tax-free savings and investments, aligning with your financial objectives for the 2025/26 tax year.
Maximising your tax-free savings
Individual Savings Accounts (ISAs) offer a tax-efficient way to save or invest, with various types catering to different financial goals. For the 2025/26 tax year, the overall ISA allowance remains at £20,000.
Types of ISAs and their limits
- Cash ISA: Allows you to save cash without paying tax on the interest earned. You can allocate up to a £20,000 allowance to a Cash ISA.
- Stocks and Shares ISA: Enables investments in stocks, shares, and funds with tax-free growth and dividends. You can invest up to £20,000 or split the allowance between different ISAs.
- Innovative Finance ISA: Includes peer-to-peer loans and crowdfunding investments. The maximum investment is up to £20,000, subject to the overall ISA limit.
- Lifetime ISA (LISA): Designed for individuals aged 18 to 39 to save for a first home or retirement. You can contribute up to £4,000 per year, with the government adding a 25% bonus (up to £1,000 annually). Contributions to a LISA count towards the overall £20,000 ISA allowance.
Junior ISA
For individuals under 18, a Junior ISA allows savings of up to £9,000 per tax year, with tax-free interest or investment growth.
Key considerations
- Use it or lose it: The ISA allowance does not roll over; ensure you utilise your allowance within the tax year to maximise tax-free savings.
- Strategic allocation: Depending on your financial goals, consider how to allocate funds across different ISAs to optimise tax benefits.
- Spousal contributions: If you have maximised your ISA allowance, assess whether your spouse or civil partner has unused allowance to enhance tax-free savings further.
- First-time buyers: Utilising a LISA can be advantageous for first-time home purchases, as it provides a government bonus to boost savings.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.