3 reasons to use your full ISA allowance this tax year

Posted 22.03.2021

The ISA allowance is the amount a person can put into their ISA each tax year. The ISA allowance for the current tax year is £20,000. The tax year runs from the 6th of April to the 5th of April the following year. And you have until midnight to invest your money. If you don’t use all your ISA allowance in one year, you’re not able to carry this allowance over to the next year so it’s important to make the most of each tax year.

Here are three reasons why it’s a good idea to use your full ISA allowance before the current tax year ends on the 5thApril.

Tax Efficiency 

One of the main benefits of an ISA is that they are a very tax efficient investment. They provide a tax ‘wrapper’ because they legally protect the assets inside the account from the following:

  • Income tax on interest paid by cash, bonds and bond funds.
  • Dividend income tax on dividends paid by shares and equity funds.
  • Capital gains tax paid on the growth in value of assets such as shares, bonds, and funds.

You don’t even have to declare your ISA assets on your self-assessment tax return.


A Stocks & Shares ISA is a flexible way of investing your money.  You can add money to it on a regular basis or whenever you have extra income.  You can even withdraw it and use it for a holiday fund – or withdraw an amount when the investment has grown in value. Keep in mind however, that the longer you are prepared to hold your investment, the more time it has to ride out any volatility while aiming to deliver a superior return to cash.

Longer term investment strategy

Investing £20,000 over the full tax year or as a lump sum isn’t possible for everyone, but the more you invest at the beginning of the tax year, the more potential your money has of performing well (although your capital can go up as well as down). By planning ahead and contributing to your ISA on a monthly basis, you could end the tax year with a stronger investment portfolio.

Given the value of investments is subject to change, stocks and shares ISAs aren’t suitable for someone with a low risk appetite or a short-term outlook. ISAs are generally suited for those who have a long term investment strategy and can invest their money for at least five years.


The value of an ISA with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested. An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.