Individual Savings Accounts (ISAs) are attracting greater attention from investors.

Next April ISAs will reach their 25th anniversary. Over the years the appeal of ISAs has waxed and waned due largely to two main factors: the tax environment and potential investment returns.

In 2023, these factors mean ISAs may once again rise in popularity:

• Prolonged freezes to the higher rate tax threshold and personal allowance reductions to both the dividend allowance and capital gains tax annual exempt amount and a lower threshold for additional rate tax have made the UK tax shelter offered by ISAs more attractive.
• Improved share market conditions and higher yields from fixed interest securities (bonds) will improve the appeal of stocks and shares ISAs.

The government’s attention meanwhile has been elsewhere – the main ISA contribution limit of £20,000 has been unchanged since April 2017.

If you have existing ISAs, it is important that you review them regularly to maximise the tax benefits and ensure continued suitability. If you have cash ISAs, that review includes considering whether switching to a stocks and shares ISA would be appropriate. Even at today’s higher interest rates (not always passed on to cash ISA savers), the returns are well below the current inflation rate.

Improved share market conditions and higher yields from fixed interest securities (bonds) will improve the appeal of stocks and shares ISAs.

Seeking advice is important for stocks and shares ISAs, not only regarding fund selection, but also in balancing the holdings with other investments owned directly or within your pension.