Lowes Magazine Issue 115

PLANNING

LOWES CONSULTANT Gershom Chan says: Wherever possible Lowes Consultants will advise clients to invest as much as they can afford into an ISA each year, simply to benefit

The ISA IHT trap The amount that can be invested for the 2020/21 tax year is £20,000. While, as mentioned, ISAs are a tax efficient means of investing in respect of income and capital gains tax, they are not entirely tax free. One tax they are not exempt from is inheritance tax (IHT). Having £100,000 invested in an ISA potentially could generate a tax bill of £40,000, which is not a problem we would want to pass on to our beneficiaries. This is where getting advice from an Independent Financial Adviser can help. Efficient financial planning will include a blend of ISA savings and investments, pension savings, and the use of trusts which can move the money outside of an estate for IHT purposes. If you have built up substantial ISA investments and are concerned about a potential IHT bill, Lowes Consultants can help advise on the right strategy for your circumstances. Call 0191 281 8811 to arrange a consultation. What is important is the selection of the investment types held within the wrappers and we advocate having a spread of investments, primarily mutual funds but also structured products for the capital protection and the known returns they offer. from the tax advantages – i.e. no income or capital gains tax on income or gains made by savings and investments within the tax wrapper. For the past few years we have steered clients away from cash ISAs other than as a repository for their ‘emergency’ cash fund (noting that cash ISA interest rates are often inferior to other savings rates). With interest rates now at or close to zero, despite the recent falls in stockmarkets, stocks and shares ISAs should prove to be the best way for investors to make money using these tax efficient wrappers.

MANY ISA INVESTMENTS ARE MADE IN THE run up to the end of the tax year on 5 April. All too often this can result in hasty decisions and suffering the hassle and stress of having to ensure all documents and payments are completed before the deadline. We recommend taking a different approach, one that is less rushed and potentially stressful, which is to invest earlier in the year, either with a lump sum, or monthly investment amounts. This allows for a more considered approach to the research and investment decisions being made. It also means your money can be invested for up to a year longer, with the benefits of accumulation. Alternatively, drip feeding money into the markets through a monthly contribution into chosen funds creates a useful habit of regular investment and can help smooth out the ups and downs of the market by capturing price rises when they occur as well as potentially reducing the overall effect on a portfolio of market falls. The benefits of long-term compounding apply here also. Is now the time to invest in a stocks and shares ISA?

12 Lowes.co.uk