What are the main tax-planning uses for Isas?
The dividend and capital gains allowances are being cut from £2,000 to £1,000 and from £12,300 to £6,000, respectively, from 6 April – and again to £500 and £3,000 from April 2024. This makes the role of individual savings accounts (Isas) more important than ever. Investments held within Isas do not incur dividend tax, and if you sell them within an Isa they do not incur capital gains tax (CGT). And when you withdraw money from an Isa it does not count towards your income tax liability. “Isas also ease the administrative hassle of completing a tax return every year as investments held within [them] do not have to be declared,” adds Alice Haine, personal finance analyst at Bestinvest.
Isas should be your first port of call for retirement savings if you have entirely used up your annual pensions allowance, which is rising to up to £60,000 from 6 April.