Despite lockdown, tax efficiency is on many investors’ minds

Our head of personal finance highlights some key points for investors to remember as the tax year draws to a close.

The FTSE All Share is down 28% over the year to date. Investors are facing a dividend drought. And today, there are dire warnings that nearly a fifth of small and medium sized UK companies are unlikely to get the cash they need to survive the next four weeks, despite Government support.

Add home schooling into the mix, and it’s surprising that long-term tax-efficient investing is on many peoples’ minds this week. But interactive investor data shows that for many people it is.

Whether investors have been put off taking the plunge into equities this year, or are still grappling with which sectors and countries to target given the current extreme uncertainty, interactive investor highlights some key points to remember for investors as the tax year draws to a close.
Moira O’Neill, Head of Personal Finance, interactive investor, says: “With a dividend drought, beaten up stock markets, a lock down and mass social and economic uncertainty, you may think the last five days of the ISA season are unlikely to be at the forefront of people’s minds. 

“However, despite the volatile markets (and possibly because of them as experienced or brave investors go bargain hunting), March has seen record trading volumes on the interactive investor platform, with the number of new accounts also up significantly on the previous year.

“If tax efficiency isn’t the first thing on your mind, it is important to remember that you can still use this year’s tax allowance without being rushed into any investment decisions. An ISA is fully flexible and the annual allowance will be lost if it isn’t used by Sunday.

“It’s often forgotten that you can keep your money in cash for as long as you need. And if you don’t want to invest yet – or find that you need it for a change in circumstances, then an ISA is fully accessible, with no lock-in.

“Investors can’t control markets, but to make our money work harder for us we can control the charges and tax that we pay on our savings and investments. 

“For SIPP investors, the annual pension allowance will also be lost if not used by Sunday. But it is very important to note, a pension is a locked-in product where you will not be able to access your cash once invested in the pension.”