Spring Budget: the earth moves, the big fat ISA carrot remains
15th March 2023 16:53
by Alice Guy from interactive investor
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More people will be grateful for their generous ISA allowance than ever, says interactive investor's Alice Guy.
Today’s Budget was a budget for pension savers. It was also good, if unsurprising news for ISA investors, with the ISA allowance preserved at £20,000 for ISAs and £9,000 for Junior ISAs. And with shrinking dividend and capital gains tax allowances just weeks away, more investors will be grateful for their ISA allowance than ever.
- Learn with ii: How to become an ISA millionaire | ISA Investment Ideas | Top ISA Funds
Alice Guy, Head of Pensions and Savings, interactive investor, says: “After a series of FTSE 100 record highs this year to date, the earth is feeling shaky again. Stock markets are responding to areas of distress as higher interest rates kick in. But shaky as the ground might be, investors can still tuck into a very generous ISA allowance carrot of £20,000.
“Despite volatile markets, more people will be grateful for their generous ISA allowance than ever. With punitively shrinking dividend and capital gains tax allowances, the race is on to move money into a tax-efficient wrapper. In February alone, Bed & ISA applications were up 206% year on year on our platform, and we have seen steep increases since November.
“Nervous investors should consider regular investing, which can help smooth out some of the highs and lows in the price of shares and which is free on interactive investor for funds, investment trusts, ETFs and popular UK shares. To really take advantage of stock market volatility, we need to have piles of cash sitting around waiting to invest. That might be fine if you’re super-rich, but it’s unachievable for most of us.
“But the good news is that even Warren Buffett advocates sticking to regular investing to build your investment wealth. Regular investing means you won’t be tempted to buy when the market is high but instead can benefit from “dollar-cost averaging”, buying at every point during the stock market cycle.
“And if you did find yourself with pots of money to invest, and ready to go with a £20,000 annual ISA contribution each year, it would take you 25 years to become an ISA millionaire assuming your pot grew by 5% a year, and 31 years assuming 3% annual growth. Whether regular investing or lump sum investing, discipline is what it takes. The current market volatility doesn’t make patience and discipline easy. But at least the generous and preserved ISA allowance gives you the tools to dream."
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