Since ISA rules were relaxed in 2015, investors have more ISAs to choose from than ever before. In line with this greater choice, the annual ISA limit (the amount you can pay into ISAs in a tax year, currently £20,000) can be spread across different types of ISAs. This means, rather than putting all your money into one type of ISA, you could, for example, put £4,000 into a Lifetime ISA (LISA), £6,000 into a stocks and shares ISA, and the remaining £10,000 into a cash ISA. But however you choose to spread your funds, you cannot exceed the ISA limit of £20,000.

ISAs are a powerful financial instruments due to their tax efficiency and flexibility. Without the benefits that an ISA provides, many clients could be faced with hefty capital gains or income tax bills. In addition to this, due to the ISA’s flexibility, as an investor’s needs change over time, it can be used to purchase alternative financial planning tools such as a pension or an inheritance tax planning product.

The exception to the rule

Interestingly, there’s a quirk in the system that means adults planning for their children could save more than the £20,000 allowance. You’ve probably heard of the Junior ISA, which is available to children under 18 and has a current limit of £4,128. However, many parents don’t know that children aged 16–18 can also have a normal cash ISA, as well as a Junior ISA – meaning they could potentially put away £24,128 in tax-efficient savings.

With a lot of 16–18-year-olds (and their parents) facing steep university fees, this anomaly could provide a welcome boost to savings in these critical few years.

Making the most of your options

Parents and anyone with savings should be looking at how their money is invested, and whether they are making the most of their tax-free allowances. At Ascot Lloyd, we’re actively advising people in this area. We’re helping a number of parents to make full use of their available allowances – using a combination of Junior ISAs, cash ISAs and LISAs as appropriate.

Particularly now that there is greater choice among ISAs, it’s best to seek professional advice on which type of ISA (or combination of ISAs) will best suit your needs. Discover how our financial advisers can help you plan for your future – and your children’s – today.



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