Saving is an essential aspect of financial planning. Finding the right place for your savings can make a significant difference to your long-term financial health. Individual Savings Accounts (ISAs) are one of the most popular savings options in the UK. They offer a range of benefits that can help you achieve your financial goals more efficiently. At Willday Wealth Management, we believe ISAs are an excellent choice for many savers and today we will explore why you should consider saving in a Stocks and Shares ISA. We’ll also discuss why it’s better to invest at the start of the tax year instead of the end.

What is an ISA?

An Individual Savings Account (ISA) is a tax-efficient savings and investment account available to UK residents. The main advantage of an ISA is that any interest or dividends you earn within the account are free from UK tax. This differs from a regular savings account. There are four main types of ISAs, including Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, Lifetime ISAs and Junior ISAs. These each cater to different savings needs and goals. At Willday Wealth Management we offer both Stocks and Shares ISAs and Junior ISAs.

Our Stocks and Shares ISA

With a Stocks and Shares ISA, your money has a greater potential to grow than with a cash ISA. As with any financial investment, there is the risk that the value of your Stocks and Shares ISA will decrease*. However any gains made are tax-free and withdrawals can be made without additional income tax to pay. Another benefit of a Stocks and Shares ISA is that you can access your cash whenever you need it. You are able to invest up to £20,000 in ISAs per tax year. This can be all in one ISA or across multiple types.

About our Junior ISA

You can save up to £9,000 per year on your child’s behalf in a Junior ISA. This can be used for putting towards their first home, university or a wedding. Your investment today will make for a brighter future for them. Your child will not be able to access these funds until they have turned 18, however, if this is a stocks and shares JISA, then they will have control over the investments within at age 16. Starting investing early gives the Junior ISA the best opportunity to grow*, and is a long-term and tax-efficient way to save towards your child’s future.

Other family members are able to contribute to your child’s Junior ISA too! The Willday Wealth Management app will allow you to share you Junior ISAs with others, who can contribute with birthday or Christmas money, or to pass on an inheritance.

Benefits of Saving in an ISA

Tax efficiency

One of the primary reasons to save in an ISA is the tax benefits. Unlike regular savings accounts, the returns you earn within an ISA are not subject to income tax or capital gains tax. This will compound over time and means your money will be working harder for you, enhancing your overall returns. There’s no need to declare the interest earned on these to HMRC – you’re entitled to keep it all!

Annual allowance

Each tax year, you have an annual ISA allowance. For the 2024/2025 tax year, this is set at £20,000. This allowance is a “use it or lose it” opportunity. By this we mean it cannot be carried forward if you don’t use your full allowance within the tax year. Maximising your ISA contributions each year can significantly boost your long-term savings. There are ISA options which don’t ‘lock-up’ your money too, so investing £20,000 at the start of a tax year doesn’t necessarily mean you won’t be able to access it in the short term if you need it. This means an instant access cash ISA can be a good home for your emergency fund.

Long-term growth potential

By investing in a Stocks and Shares ISA, you can benefit from the long-term growth potential of the stock market. While there is a risk involved, historically, investments in stocks and shares have outperformed cash savings over the long-term. This makes it a valuable option for growth-oriented and risk-tolerant savers, especially due to the high levels of inflation we have seen over the last couple of years. Inflation erodes the real value of your money as you can buy less with it when prices increase so making sure your money is growing over the long-term is very important.

Why not to wait until the end of the tax year

Many savers make the mistake of waiting until the end of the tax year to contribute to their ISAs. While it is better to invest in March than not at all, there are several reasons why this it’s advantageous to invest earlier in the tax year.

By delaying your ISA contributions, you miss out on potential growth as well as the tax-free benefits. If you invest earlier, you maximise the period during which your savings benefit from tax-free growth. Investing at the beginning of the tax year means your money is invested for longer. Alternatively, investing regularly throughout the year can also be beneficial in helping to smooth out market volatility and enhancing overall returns.

Contributing smaller amounts regularly rather than a lump sum at the end of the tax year can make it easier to manage your cash flow. It also helps you develop a disciplined savings habit, ensuring that you consistently work towards your financial goals.

How Willday Wealth Management can help

Here at Willday Wealth Management, we recommend taking advantage of your ISA allowance early in the tax year. This will allow you to maximise the aforementioned benefits and enhance your long-term financial health.

Our team of experienced advisors is here to help you navigate your Stocks and Shares ISA or Junior ISA options. We’ll help you develop a portfolio that aligns with your savings goals.

So don’t delay – start making the most of your ISA allowance by contacting our team today!

* Please note: with investing, your capital is at risk and you may get less than what you invested. Tax treatment depends on your individual circumstances and may change in the future.