The impact of COVID on public finances has left the UK in a debt that will now need to be repaid. Whilst any changes to the current tax system are yet to be confirmed, it is certain that changes will have to be made as the government recovers between £27billion and £102billion by 2025/26.
The next budget is in March and it is widely expected that this is the time when we will see taxes rise with many industry experts speculating that capital gains tax will be heavily hit. This means that the tax breaks gained within ISAs are more alluring than ever in order to keep your money out of the hands of the taxman. Whilst the current ISA allowance for 2020/21 is £20,000, this will be under review in the next budget and investors and savers would be wise to utilise their allowance now in order to protect their money. Any unused allowance will be lost once the financial year ends and any gains on your investments and savings will be subject to tax.
Providers tend to offer the best rates at the end of the financial year. This is known as the ISA season. There are two main types of ISA on offer, the first being a cash ISA, which operates much like a standard savings account, the second being a stocks and shares ISA, otherwise known as an investment ISA which allows you to invest your money.
When choosing a cash ISA, your main consideration should be the interest rate on offer. Whilst the interest rates offered on an easy access ISA may be comparable to a basic savings account, the tax benefits still make this a viable option. Currently Coventry Building Society are offering 0.4% on their easy access account and an account can be opened online.