Max £20K ISA contributions on ii jumps 65% since Labour’s win
Figures reported amid speculation of capital gains tax changes in the upcoming Budget.
14th October 2024 15:04
by Myron Jobson from interactive investor
- Bed & ISA transactions on ii up 44% since 1 July to the end of September 2024, compared to the same period in 2023
- Myron Jobson, ii’s senior personal finance analyst, offers some tips on how to broach your finances amid speculation ahead of the Budget
interactive investor, the UK’s second-largest DIY investment platform, has seen an increase in the number of investors maxing out the annual ISA allowance, and a spike in Bed & ISA transactions amid speculation of changes to the investment tax regime in the Autumn Budget.
- Learn with ii: What is Bed & ISA? | What is a Managed ISA? | Transfer a Stocks & Shares ISA
The number of ii customers maxing out the £20,000 annual ISA allowance is up 65% from the start of July to the end of September compared to the same period in 2023.
This period covers Labour’s general election victory and warnings by both the prime minister and the chancellor that the upcoming Budget will involve 'difficult decisions' on tax, spending, and welfare as part of efforts to plug a £22 billion black hole in public finances.
Meanwhile, Bed & ISA transactions also jumped over the same period, up 44% compared to the same period in 2023. Bed & ISA involves transferring assets held outside a tax wrapper into an ISA, so that future investment growth and income are sheltered from tax. It can also be a useful way to take advantage of any unused ISA allowance, especially if an investor has less ‘new’ money to invest.
Customers will pay a trading fee on the repurchase, not the sale. They will also pay stamp duty and market spread costs. Capital gains tax (CGT) is payable on any profits above a person’s annual allowance, but moving the investments to an ISA means you won’t pay CGT on those profits in the future.
Commenting, Myron Jobson, Senior Personal Finance Analyst at interactive investor, says: “Fears of a less-generous investment taxation regime have provided extra impetus for investors to do what they should already be doing: making the most of the tax-efficient ISA wrapper, which shields gains and income generated from investments from tax.
“It is a similar story when it comes to Bed & ISA transactions, with the chancellor reportedly reviewing Treasury modelling of the impact of a rise in the CGT rate to up to 39% - which would represent a massive hike from current levels of 10% and 20% on investment profits for basic and higher-rate taxpayers, respectively. Shifting existing investments into an ISA via Bed & ISA can pay dividends - which, over the long term, is likely to outweigh any charges that might apply.”
How to broach your finances amid speculation ahead of the Budget
As the Chancellor’s Budget announcement looms, speculation abounds, leaving many of us wondering how to best prepare our finances.
Myron Jobson offers some tips to consider during this period of uncertainty:
Stay informed but don’t make irreversible decisions
“As we await the chancellor’s announcements, remember that speculation is just that - speculation. While it is worth staying informed on the latest developments from credible news, avoid making hasty and irreversible financial decisions based on speculation. Until the Budget is officially announced, details remain uncertain, and reacting prematurely could do more harm than good.”
Review your current financial situation
“The period leading up to the Budget is a timely opportunity to take stock of your financial situation. Assess your savings, investments, debts, and overall budget. Understanding your starting point is crucial to making informed decisions once the Budget details are revealed.”
Stay flexible and adaptable
“Financial resilience is about flexibility. Be prepared to adapt your financial plans in response to new information. Whether it’s adjusting your savings strategy, rebalancing your investment portfolio, or revisiting your budget, staying adaptable is key.”
Continue to plan for the long term
“While the Budget may bring short-term changes, it’s important to keep your long-term financial goals in mind. Continue to focus on building a robust financial future through consistent saving, prudent investing, and careful planning.”
Consider professional advice
“If you’re unsure about how potential Budget changes could impact your financial plans, seek advice from a financial adviser. They can provide tailored guidance and help you navigate any new financial landscape that emerges post-Budget.”
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Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.