ISA deadline 2023

Our clients on the whole are making their annual ISA contributions as normal this year and most of them are making the full contribution. The cost of living has had an impact on family finances of course but people are still trying to save for their retirement in the most tax-efficient way possible. ISAS now of course are even more vital in tax planning as capital gains and dividend tax allowances are being slashed from next year.
We have seen no change in client risk appetite despite weak markets last year. We use index funds and don't believe in timing markets and so don't play around with our asset weightings. Having said that, we are much more positive now on government bonds at 3.5%-4% yields than we have been for well over a decade and are very comfortable with our allocations in this asset class going forward.

Given the upcoming changes to taxation, in particular the reductions to the CGT allowance and the dividend allowance, ISAs have become even more valuable when structuring a client's investments. When you combine this with the fact that markets are some way down from where they were this time last year, we are finding that ISAs are extremely popular with our clients.

However, as we believe in an evidence-based approach to investing, we are seeing clients invest appropriately and strategically in line with their agreed risk profiles rather than take any tactical decisions on exactly where to put their money. We believe that the most reliable way to achieve the optimal returns is to put a plan in place and then ride out the frequent, but historically always temporary, declines in the markets.

The cost-of-living crisis has seen a reduction in some clients that save regularly into their ISA's reduce the amount they are paying in. Generally, this was not about increases in costs, but due to their company not paying as large bonuses or having high enough earnings to support them. For Business Owners, this has been due to having to pay increased wages to retain and attract staff.

For many clients, there has been increased interest in funding ISA's and Pensions due to the reductions in the Capital Gains Tax Allowances from next year. They are encashing directly held shares and from GIA's or selling buy to let properties to get the gain taxed whilst the exemption is still £12300.

As ever, the best funds are globally diversified, low cost index funds with as high a proportion in equities as they can cope with.

I have seen an increase in the number of clients that want to hold on to excess cash rather than invest. With the cost of energy bills and the upcoming reduction in support from the government, clients have been increasing their emergency cash funds in preparation for 2023’s winter. Fortunately, this has coincided with the BOE raising interest rates making cash holdings more attractive. The increase in rates has added the complication of Savings Account Vs ISA. With low rates, most peoples' income fell within the personal savings allowance, so there was little need for the tax benefits for a cash ISA, meaning the ISA allowance could be used for stocks & shares investments. However higher rates now mean you must be tactical on how to split the cash, using the allowances available.

With some people having to pay tax on the interest they earn on cash savings for the first time in a long time due to improved interest rates, many are turning to ISAs for the tax-free returns they provide. Your ISA allowance is very much use it or lose it each year and it remains important to take full advantage of your tax-efficient allowances.

My clients are no more risk averse. They understand that investing is for the medium to long term and falls in markets are a positive, an opportunity, for the long-term investor who contributes regularly to their investments.

Most of my clients have decades ahead of them so short-term fluctuations are of little importance. Holding your nerve and investing in the great companies of the world (equities) remains the best way of beating inflation and enjoying positive long-term returns.

Using your ISA allowance - whether investment or cash, is becoming more and more important now that the CGT allowance is being drastically cut and cash rates are on the rise. The personal savings allowance doesn't protect a lot of savings these days.

I've not seen a downturn in clients using their ISA allowance. Making use of an ISA is becoming even more important, given the incoming cuts to the Capital Gains Tax allowance. Rising interest rates also mean many people are more likely to incur a tax liability on their cash deposits held outside of an ISA. We aren't concerned with recommending particular investment funds or making changes to asset allocations in an attempt to time the market. The key is always to remember the long-term investment goal and ignore short-term fluctuations.

For those too nervous of investment markets presently, I still recommend making use of your ISA allowance. Even if you just use a cash ISA for now, it can always be transferred across to an investment ISA at a later date, and this crucially won't count towards that year's annual ISA allowance.