17 January 2024

Making the most of your ISAs before tax year-end

At a glance

  • Even though interest rates may have peaked, above average inflation rates mean Cash ISAs are still losing value in real terms.
  • Investing in a mix of Cash and Stocks and Shares ISAs may give your money the best chance for greater growth.
  • We can help you rebalance your cash savings and stocks and shares investments, improving your family’s financial wellbeing.

Time to take stock of your ISAs

We’re all used to checking we’ve made the most of all those annual tax allowances as we head into tax year-end. But it’s also the perfect time to review whether you’re still getting value for money from your Cash ISAs. With many of us still needing to keep a watchful eye on family finances, you want to be sure that any money you are able to save is going to word hard.

At the time of writing, inflation appears to be coming under control, while interest rates remain higher than average. However, once interest rates begin to fall, your savings or investments will be slowly losing value over time if inflation outpaces the average interest rates.

Cash versus Stocks and Shares ISAs – the current situation

Cash ISAs are still hugely popular, for compelling reasons. They offer easy, simple access to cash. In the 2021/22 tax year (the last year for which figures are available), Cash ISAs accounted for 61% of all accounts; that’s a decrease of 920,000 compared to 2020/21. Stocks and Shares ISAs increased by 345,000 in the same timeframe.1

Working out which type of ISA is best for you

Cash ISAs are conveniently easy to access, as well as being very tax efficient. And they’re a source of ready cash if you hit an unexpected expense.

When you invest in Stocks and Shares ISAs, your money has the potential to grow more than in a Cash ISA. But, unlike a Cash ISA, your capital is also at risk, and it’s your personal decision how much risk you feel comfortable with. You can hold a mix of company shares, bonds and other assets – and most people opt to invest in funds – mixed portfolios of investments – which spread their risk.

If markets fall, the value of your savings will dip. However, the longer you stay invested, the more you average out the ups and downs of the market. That’s one of the reasons why we believe in investing for the long term.

If you’re holding a lot of money in Cash ISAs or savings accounts, you may miss out on growth that could go a long way to help you achieve your financial wellbeing.

Over time, you have the potential to earn more than in a Cash ISA. And, of course, you still won’t pay tax on any gains or income.

Getting the most out of your ISAs

Working out what’s best for you and your family is something that we help our clients with every day. Most people find that a combination of Stocks and Shares and Cash ISAs means they have stability in the short- and medium-term, and the long-term potential to create wealth for the future

With that in mind, we’ve created an ISA review checklist, ahead of tax year-end:

How long have you had your Cash ISAs?

If you’ve had any of your Cash ISAs for more than five years, then cash may have unwittingly crept into your long-term financial planning. If you’re keeping this money handy to cover unforeseen bills or a rocky patch, that’s a good plan.

But over the longer term, you’re less likely to get the same level of returns and growth that a Stocks and Shares ISA could deliver.

So do I need my Cash ISAs?

It’s also worth considering how important Cash ISAs are in your overall financial plans.

You can put up to £20,000 into a Cash ISA each year, which is very tax-efficient and versatile.

You have the option to split your £20,000 ISA allowance any way you like across a Cash ISA, Stocks and Shares ISA, and Lifetime ISA (maximum of £4,000), for example, as long as you stay within the limit.

Keep an eye on the interest rates, though. If interest rates rise, the amount you can save in standard accounts before you start to pay tax on it will reduce.

Getting the mix right

To really make the most of the tax perks of ISAs, it’s usually best to invest in assets which have the potential to do better over time – and that means stocks and shares. Even for experienced investors, investing more in a volatile stock market can feel daunting.

A Cash ISA can improve your financial wellbeing and family goals in the short- to mid-term, and a Stocks and Shares ISA, invested to achieve long-term growth, may be the right choice for your family’s future goals, or your own retirement.

So before the end of this tax year, it’s worth having a chat with us about your own ISAs to make sure they fit with your ‘bigger-picture’ financial plans.

We can help you work out how much you want to hold in cash, and how much you feel confident in investing in stocks and shares to give you the best chance of short- and long-term financial wellbeing, and a future that’s everything you imagine.

Thinking of changing your ISA mix? What to look out for in 2024

If you have multiple ISA accounts, you may also find it easier to keep track of them if you consolidate them into one plan.

If you transfer as cash, you’ll be out of the market until the transfer is complete. You won’t lose out if the market falls, but your money won’t be subject to any income or growth if the market rises in this period. If you transfer a fixed rate cash ISA before the end of the term, you may have to pay a fee.

If you’re transferring funds from a Stocks and Shares ISA you’ll remain invested until the transfer. You’ll be unable to switch or sell these funds while the market falls or rises during this time.

It’s possible, where appropriate, to transfer money out of existing Cash ISAs into a Stocks and Shares ISA without it reducing your allowance for the current year.

You should also be aware that your current provider may charge exit fees.

Taking stock before tax year-end

Having a regular catch-up with your financial adviser is always a good plan, but coming up to tax year-end it’s even more important. Especially if your long-term plans or family circumstances have changed in the last twelve months.

You’ve still got plenty of time to make some tax-smart adjustments to your ISAs and investments – and your family will feel the benefit.

The value of an ISA with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested.

An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

Cash ISAs and Lifetime ISAs are not available through St. James’s Place.


1Gov.uk published June 2023. Accessed November 2023

SJP Approved 10/01/2024

By Matthew Forbes