Matthew Parden, financial planner at Marygold & Co, spoke about the substantial benefits of using up your cash ISA allowances.
Savers are being urged to max out an allowance which could see you get an extra £690,000 tax-free. Matthew Parden, financial planner at Marygold & Co, spoke about the substantial benefits of using up your cash ISA allowances.
Matthew said: “With the tax year ending in April, now is the time for Brits to make the most out of their ISAs, pensions, and savings allowances before they reset.” Mr Parden said: “Investing the full ISA allowance of £20,000 annually into a stocks and shares ISA with an average 5% return, could grow to around £690,000 over 20 years – completely tax-free. In contrast, the same investment outside an ISA could see tax deductions on dividends and capital gains, reducing return.
He said: “Contributions benefit from tax relief at your marginal rate – so a basic-rate taxpayer putting in £8,000 will see this topped up to £10,000, while a higher-rate taxpayer could claim back an additional £2,000 through their tax return.
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“If you are fortunate enough to earn over £100,000, you face a marginal rate of tax of 60% on earnings above this amount (up to £125,140) because of the gradual withdrawal of the personal allowance, which is known as the tax trap.
“If you earned £110,000 and made a pension contribution of £10,000 you would in effect only be paying £4,000 to get a £10,000 benefit. Ignoring these allowances could therefore, mean missing out on significant tax savings and long-term financial growth.”
He warned: “Leaving it too late could lead to rushed decisions, potential delays with providers, and even missing deadlines altogether. By planning ahead, you give yourself time to make informed choices, ensuring your money is working as efficiently as possible.”
Mr Parden said: “If you have missing NI years from the 2006-2016 period, it’s crucial to act now before the deadline, as this could be a cheaper and more beneficial way to increase your state pension.”