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What to know about ISAs in 2019/2020

The rules around ISAs (or individual savings accounts) change relatively often and different types of ISA rise and fall in popularity depending on where savers consider the most competitive place to put their hard earned money.

ISAs are a great way to save because of their tax efficiency. You don’t pay income tax or capital gains tax on the returns and you can withdraw the amount any time as a tax free lump sum. Because of their tax efficiency, there are set limits on how much you can save using ISA accounts.

The 2019-20 tax year is an interesting year for ISAs because the main annual allowance isn’t increasing. The yearly total you can invest in an ISA remains at £20,000. This means that the ISA limit remains unchanged since April 2017.

Remember that all ISAs don’t have the same allowance. For Help to Buy ISAs, you can only save a maximum of £200 a month, on top of an initial deposit of £1,200. Lifetime ISAs (LISAs) have a maximum yearly allowance of £4,000, on top of which you benefit from a government top-up of 25% of your contributions.

One ISA allowance that is rising (slightly!) is the Junior ISA, increasing from £4,260 to £4,368. This means that relatives can contribute slightly more to a child’s future, in a savings account that can only be accessed when they reach 18. Junior ISA accounts are rapidly gaining in popularity, with around 907,000 such accounts subscribed to in the tax year 2017/2018. Great news for the youngest generation!

Stocks and Shares ISAs are also gaining more popularity, with an increase of nearly 250,000 in the last tax year. On the whole, though, the number of Adult ISA accounts subscribed to in the last year fell from 11.1 million in 2016/17 to 10.8 million in 2017/18.

For investors with Stocks and Shares ISAs, Brexit uncertainty has understandably created cause for concern. In this scenario, your best course of action is to make sure that your investments are properly diversified around the globe. Speak to us if you are unsure about what you can do to reduce risk during any post-Brexit turbulence. We’ll be more than happy to help.

Sources
https://blog.moneyfarm.com/en/isas/annual-2019-isa-allowance

Parent Woes on University Debt

I have just received a question from a parent worried about their son’s university days, I thought I would share this with you.

‘My son has just received a place at University. When he finishes and comes back he will owe between £20,000 – £25,000. We feel that he will never be free from debt. What can we do or is there anything we could have done to help him?’

Firstly, thank you for your questions, and it is always good to see people that are having a look at the future and planning financially.

The debt that you son will amount will depend on a number of factors, including expenditure, the type of course and the university location.

Your calculations look like a good forecast – in terms of what you can do now – I would suggest a good budget planner, which I will email over, this is tailored to university students and gives a good idea on type of costs your son will entail whilst he is away. This will enable to carefully budget plan for all costs and hopefully keep an eye on debt.

Financial Support that is available
– Student Loans (for tuition fees and living costs)
– Maintenance Grants and Bursaries
– Part Time Work

Depending on the type of course and time constraints, part time employment is also a good way to earn additional income – the best type of employment is something that is related to the course or future career (but this is not always possible!) There is normally a job centre at most universities – one final thing on employment, don’t forget you may have to pay tax !

My top 5 ‘Need to Know’
1. Your budget will depend on where you live and study
2. Work out what type of student loan is suitable for your needs
3. Find out if you are egilible for other types of financial aid
4. Budget for tuition fees and rent when calculating your outgoings
5. Keep your eyes open for student discounts wherever you go

In relation to your second part of the question, is there anything I could of done? Hindsight is a wonderful thing, there are always things that we could do.

A regular savings plan could have helped towards your goals, the most important thing with any goal setting objective, is the risk you are willing to take, the time frame that you have available, and what you want to achieve. Always be careful of the tax position of any savings plan.

Just remember – Effective student financial planning means you will not have to graduate university with a huge amount of debt as well as a degree !

Good Luck !