Happy New Tax Year guys! As much as you know I’d use any excuse to pop open the Champagne and find someone handsome to kiss – this time of year is legitimately worth getting excited about.
And just like New Year where we promise to lose half our body weight or stop drinking like a fish – the financial new year is the perfect time to make good decisions. Financial ones. Yep, hold onto your hats because I’m going to talk about my favourite subject again –
Twilight films ISAs.
Hate paying tax? Well, this is for you, because technically, an ISA is a tax loophole (how very Jimmy Carr eh?). You can put away a stonking £20,000 a year in 2017/2018 – earn interest on it AND don’t pay tax. It’s a no brainer.
It’s not just for rich people with big lump sums either (though if you do have a big amount to invest, you’d be crazy not to do it asap). You can put away whatever you can, monthly and still make money off it.
You know what it’s like though, you hold off resolutions, even though you know they’re good for you, because they seem like hard work or because doughnuts are just too delicious. Thing is, you’ve got to start right away if you want to maximise the benefit. The earlier in the tax year you start your ISA, the better.
Now of course I know you’ve read every thrilling word I’ve ever written on this blog before (ahem), so you’ll know there are lots of different kind of ISAs, which depend on what you want to get out of them. However, I’m going to concentrate on investment ISAs now and pitch the case as to why you should (if you plan on getting one), go out now and start saving straight away.
You know those inspirational quotes you see on Instagram, tattoos and cushions? Like, ‘Life isn’t about waiting for the storm to pass, it’s about learning to dance in the rain.’ Well I bloody hate them. They make my lip curl with contempt. HOWEVER, I read one a few months ago and I think of it often. ‘This time next year you’ll wish you started today’. I think this applies monthly, weekly, daily and even hourly.
What is a Stocks and Shares ISA?
If you want to get into Stocks and Shares ISAs, you need to dress in an 80’s power-suit and start screaming ‘SELL, SELL, SELL’ down your massive phone, while downing a dirty martini at eight in the morning.
Ok, hands up, that’s a lie. Although, no-one would stop you dressing like Gordon Gekko if you opened an account, and you can dabble in Stocks and Shares (again, tax free) without being an expert.
So you’d go to a company such as Fidelity, where you can use your ISA allowance to invest in equity funds, bond funds and cash however you choose (don’t panic, they’ll give you lots of help).
How much money could you make?
You can make more money with Stocks and Shares ISAs compared with your standard cash ISA, but you also take on more risks. The value of the markets and funds can go down as well as up up – so there is ALWAYS potential that you could get back less than you initially put in. Don’t let anyone tell you anything different.
Fidelity actually has an ISA calculator that allows you to see what you *could* potentially earn with a stocks and shares ISA. Of course, the figures are only examples and are not guarantees.
Investing at the beginning of the tax (yep, now) year gives your money an additional 12 months of tax-efficient growth potential. You could also benefit from the impact of compounding – the magical snowball effect of building new investment returns on any investment returns you’ve already achieved.
And let’s face it, any sentence with the world ‘snowball’ in it isn’t going to be bad is it?
Should you do it?
Look, I’m no Mystic Meg, so I don’t know what exactly is going in your life – financially or personally (unless I’m stalking you on social media).
I do believe that EVERYONE should be saving if at all possible. Of course, if you’re paying of debt – you concentrate on that first. But if you have extra money – even if it is a few quid, your best bet is to put it away and earn interest on it. That’s free money.
An ISA is a great way to save money thanks to the lack of tax on it, so do a bit of research and choose the right one for you (if you’re a first time buyer, get a Help To Buy one for example).
HOWEVER, don’t hold off on making a decision and think you’ll do it next month, or ‘at some point’ – because the sooner you begin, the better off you’ll be.
A warning: Remember, Stocks and Shares can go up and down – so you *could* lose money. You should really seek advice if you’re unsure if they are for you.
Have you opened a new ISA? What kind is it? Let me know in the comments.