Getting the most out of your ISA and pension allowance

Business | 03/22/2021

Getting the most out of your ISA and pension allowance

Investing wisely is vital to your future financial security. The right tax planning can ensure your money is working harder and smarter.

Investing your money wisely plays an incredibly important part in your ability to achieve the things in life that matter most to you. By utilising the generous allowances of an ISA or maximising the fantastic tax benefits provided by pension contributions, you can ensure you’re on track to securing your financial goals.

Yet the reality is that many people don’t make the most of the allowances they’re entitled to, which means they’re missing out on valuable tax savings and opportunities to boost their wealth. With tax year-end just around the corner, make sure you understand the allowances you’re entitled to so that you can ensure your investments are working harder and smarter in securing your future.



Since their introduction in 1999, ISAs (or Individual Savings Accounts) have become one of the most popular ways to save and invest for the future, providing a simple and flexible way to help achieve financial freedom and peace of mind.

The key attraction of ISAs is that there is no liability to Income Tax or Capital Gains Tax on profits or withdrawals. Sheltering your money from tax can make a big difference to wealth you can create over the longer term.

Your annual ISA allowance is £20,000 for the current tax year. You can invest it in one type of account, or you can choose to spread it across several different types of ISAs. For example, you could put £6,000 into a Cash ISA and £14,000 into a Stocks and Shares ISA.

However, if returns on your Cash ISA savings aren’t keeping up with inflation, then the spending power of your money is reducing. That’s why it’s important to think long term with your valuable allowance.
If you choose a Stocks and Shares ISA, you can invest in a portfolio of funds, rather than individual shares. This spreads your money far more widely, offering the benefits of diversification and professional management. By investing in assets capable of generating income and capital growth, a Stocks and Shares ISA gives you the chance to make the most of the long-term tax benefits of your annual ISA allowance.

It’s important to remember that Lifetime ISAs work differently. You still benefit from no Income Tax or Capital Gains Tax on your profits, but the government also offers a bonus of 25% of the money you pay in. Consequently, the annual allowance is much lower at £4,000 each tax year.

Your ISA allowance is a use-it-or-lose it opportunity. If you don’t use it before the end of the tax year, it’s gone for good. This means you could be losing out on valuable tax-saving opportunities that can help your money to go further towards your future.

Make sure you don’t miss out on this tax year and utilise your annual allowance before 5th April. If you’d like to know more about ISAs, read more here.

Please note that St. James’s Place does not offer a Lifetime ISA.



You can pay as much or as little as you wish into your pension. However, you will only receive tax relief on contributions up to a maximum of £40,000 each tax year. If you’re a high earner the allowance may be less, depending on how much you earn.

With all personal pension contributions, you get an automatic top-up for basic rate tax relief of 20%. That money is paid directly into your plan by your pension provider. So, if you’re a basic rate taxpayer and have £4,000 to invest in your pension as a lump sum, you’ll get £1,000 in tax relief on day one. That’s a very quick boost on your initial contribution. If you’re a higher or additional rate taxpayer, you can claim the additional 20% or 25% of tax relief through your self-assessment tax return.

This extra tax relief is paid to you as a cash sum upon completion of your tax return. So, by paying more into a pension, you will pay less tax, meaning you will have even more to put towards your retirement.

If you have fully used your annual pension allowance, you may be able to carry over any annual allowances that you didn’t use from the previous three tax years. You can find out more about this on the website.

It’s important to remember that if you exceed the pension lifetime allowance (currently set at £1,073,100), you’ll be subject to tax on your contributions. The pension lifetime allowance is for all your pensions combined so if you have more than one, you’ll need to add up how much you have in each to get a grand total. You can speak with your pension provider to find out how much of your lifetime allowance you’ve used. Please head to the website to find out more about the pension lifetime allowance.

Always try remember, the longer your money is invested, the more potential it has to grow – thanks to the power of compounding. Whilst the idea behind a pension is simple, sometimes making the right choices can be incredibly complicated.

Whether you have a question about ISAs or your pension allowances, or you would simply like advice about how best to save for your future get in touch with our expert advisers today.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Arrange a consultation

Explore what wealth means to you.