Why the Stocks & Shares ISA Deadline Matters Even If You Don’t Have Much to Invest

Why the Stocks & Shares ISA Deadline Matters Even If You Don't Have Much to Invest
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The deadline to use this year’s ISA allocation is just a few days away. After 11:59 pm on Tuesday, April 5, the ISA allowance for 2021/22 disappears, whether or not you have used it.

So why would the ISA deadline matter even if you don’t have much to invest? We’ll see.

What is the ISA subsidy?

You can save or invest in your ISA without having to pay taxes on the interest, capital gains, or dividends you earn.

Your ISA allowance is the maximum amount you can put into any ISA type within a given fiscal year. The allowance for the current tax year and 2022/23 is £20,000. In fact, the ISA Assignment it has been frozen at this level since 2018/19.

How does the ISA deadline work?

The ISA deadline refers to April 5, as this is the date the 2021/22 fiscal year ends.

When it comes to ISAs, the fiscal year is very important. That’s because it also means the arrival of a new annual ISA allocation, as well as the end of previous years’ allocation.

Simply put, if you don’t use your ISA allowance in a given tax year, you lose it. You may not carry over any proportion that you have not used in one fiscal year to the next.

Is there still time to open a Stocks and Shares ISA?

There is still time to open one ISA stocks and shares before the end of the fiscal year. That said, it’s best to avoid leaving it until the last minute.

This is because to open an ISA, you will need to make sure you choose an account that is right for you. For example, if you choose a stocks and shares ISA, you will need to choose how to invest. Hasty investment decisions are certainly not recommended!

In addition to this, to apply for a Stocks and Shares ISA, you will typically need to have a number of personal details, such as your national insurance number by hand. So it might be better to act sooner rather than later, as you may need time to dig these things out.

For more information on why it’s best to avoid leaving it until the last minute to open an ISA, check out our article exploring Five Pitfalls to Watch Out for Before Opening a Stocks and Shares ISA.

Why does the ISA deadline matter if you don’t have much to invest?

If you have less than £20,000 to invest, you may not mind using this year’s ISA allowance. After all, you can always store your wealth in an ISA for the next tax year.

However, if you have this mindset, it’s important to keep two things in mind.

1. You may have more to invest next year

Just because you have a relatively small sum to invest this year doesn’t mean that will be the case next year.

For example, you may get a job promotion within the next 12 months or so. Alternatively, you may have an epiphany next year and decide you want to move more of your savings into investments.

The point is that changing circumstances could mean you’ll have a larger sum to invest next year. So if you don’t use this year’s ISA allowance, you may regret it.

2. ISA allocations could be reduced in the future

While the annual tax-free allowance has remained at £20,000 for four years, the government reserves the right to change it in the future. This means that it is always possible that the ISA allocation could decrease.

One could even argue that this is more likely than ever due to the UK’s worryingly high interest rate. budget deficit. In other words, reducing ISA’s future annual allocations could create a significant windfall for the Treasury, so it shouldn’t be ruled out.

So if you want to open or add to a Stocks and Shares ISA, then it might be a good idea to get going!

For a list of ISA options, take a look at The Motley Fool’s Top Rated Stocks and Stock ISAs.

Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Don’t leave it for the last minute: fix your ISA now!

stocks and shares isa icon

If you are looking to invest in stocks, ETFs or funds, then Opening a Stock and Share ISA could be a great choice. Protect up to £20,000 this tax year from the Taxman, there is no UK income or capital gains tax to pay for potential gains.

Our Motley Fool experts have reviewed and classified some of the best ISA Stocks and Shares available, to help you choose.

Investments involve various risks and you may get back less than you invested. Tax benefits depend on individual circumstances and tax rules, which may change.

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