Interactive Investor

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.

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."

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

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