Home Finance ISA boost: How to top up your ISA for free each year

ISA boost: How to top up your ISA for free each year


Individual Savings Accounts (ISAs) allow people to save tax-free. There are several different types of ISAs available from many different providers, so before anyone considers opening an ISA they should take time to research their options. Read on to find out more about the savings limits for ISAs and how some people could fill up their ISAs for free.

What is the annual ISA allowance?

For the 2020 to 2021 tax year, the maximum amount someone can save in ISAs is £20,000.

There are four types of ISAs available, including cash ISAs, stocks and shares ISAs, innovative ISAs and Lifetime ISAs.

The Government website explains people can put money “into one of each kind of ISA each tax year”.

READ MORE: Coventry Building Society: Regular savers can get 1.05% interest rates

Alex Davies, Wealth Club founder and CEO, told Express.co.uk: “You can transfer existing ISAs into a VCT ISA.

“When you do you get 30 percent income tax relief so transfer £20,000 and you could get back £6,000 in tax relief.

“As with an ISA, your money in a VCT grows free of income and capital gains tax.

“Who could this be handy for? Someone who has a large tax bill but not much spare cash. I.e. they can transfer an existing ISA into a VCT and get 30 percent tax relief without parting with any new money.

“The VCT annual investment limit is £200,000 so you could potentially transfer up to £200,000 of your ISA and save up to £60,000 in income tax that year.

“But beware, VCTs are for experienced investors only. Because VCTs invest in early-stage businesses they are risky and illiquid.

“Most people who invest in VCTs are higher earners restricted by the pension annual allowance and the pension lifetime allowance.

“Before investing in VCTs you should consider putting as much as you can into your pension and normal ISA first.

“To retain the tax benefits you also need to keep your VCT for a minimum of five years.”

By this reasoning, someone could move money saved in their ISA into VCTs and get back £20,000 in tax relief, enough money to fill up the annual ISA allowance.

More information about Venture Capital Trusts can be found on the Government website HERE.

Before any investment, people should discuss their options with a financial adviser.


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