Tax Year Deadline

8 February 2024

Tax Year Deadline

As we approach the end of the tax year on 5th April 2024, it is important to be mindful that this date marks the deadline for subscribing funds to your Individual Savings Account ("ISA") for the 2023-24 financial year. The annual ISA allowance for this tax year remains at £20,000, the level it has stood at since April 2017, offering individuals the opportunity to save up to this amount in a tax-efficient manner.

One of the significant advantages of holding funds in an ISA is the tax-free status of the interest earned on the cash within the account. Additionally, both income and capital gains derived from investments held in an ISA are exempt from taxation. This stands in stark contrast to funds held outside of an ISA wrapper, where interest on cash, income generated and gains from investments are all subject to tax above a certain allowance, depending on your individual tax rate.

The current Capital Gains Tax ("CGT") allowance for investors is relatively modest, standing at £6,000 for the 2023/24 tax year and reducing to £3,000 for the upcoming 2024/25 tax year. Given the limited allowance, there is a high likelihood that individuals may find themselves facing an increased tax burden on their gains. The forthcoming reduction in the CGT allowance implies that managing gains will become more intricate, necessitating a more incremental and prolonged approach to mitigate tax implications.

Fully subscribing to your ISA before the tax year concludes can serve as a strategic financial move to minimise your overall tax liability. By doing so, you take advantage of the tax-free status of interest on cash and shield both income and capital gains from investments within the ISA from taxation. This proactive approach can be particularly beneficial, considering the tightening CGT allowances in subsequent tax years, potentially resulting in higher tax obligations for those who don’t take full advantage of their annual ISA allowance.

In essence, subscribing your ISA to its maximum limit before the tax year-end not only allows you to make the most of the current £20,000 annual allowance but also acts as a prudent tax planning strategy. It protects against potential future increases in tax liabilities, especially in the context of diminishing CGT allowances. As the deadline approaches, taking advantage of your ISA allowance could prove to be a crucial step in optimising your financial portfolio and securing a more tax-efficient future.

Find out more about Walker Crips' Stocks and Shares ISAs.

Important information

This publication is intended to be Walker Crips Investment Management's own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England and Wales number 4774117.