I’ve maxed out my ISA. Can I still invest with you?

Q: I’ve used my full ISA allowance this tax year and can’t add more until April. Can I invest my spare cash with Fidelity in another way? I’m 79 and a widow.

A: That’s an interesting question - particularly at this stage of the tax year.

Your ISA allowance resets on 6 April each year. As you’ve already realised, once you’ve used your allowance for the current tax year, you won’t be able to add new money to your ISA until the new tax year begins.

• Get updates on markets, ISA funds, pension saving and much more

As you’re 79, pension contributions aren’t an option, as tax relief on personal pension payments is only available up to age 75. That means an ISA remains the main tax-efficient wrapper available for new investments. You’ve done the right thing by making full use of this valuable allowance before considering alternatives.

But if you then have spare cash you’d like to invest before April, you could consider opening an Investment Account.

An Investment Account allows you to invest in funds, shares and ETFs in much the same way as an ISA, and there’s no limit on how much you can put in. Your money is invested in the market, so it has the potential to grow over time – although it can fall in value as well.

The key difference is tax.

Unlike an ISA, investments held in an Investment Account aren’t protected from tax. However, that doesn’t automatically mean you’ll pay tax.

Each tax year, you can make up to £3,000 in capital gains before Capital Gains Tax (CGT) becomes payable. This allowance applies across all your investments, not per account. Capital gains are usually only triggered when you sell an investment and make a profit.

For example, if you invested £10,000 and it grew by 5% over a year, that would be a gain of £500. That sits well within the £3,000 annual CGT allowance, so there would be no Capital Gains Tax to pay in that scenario.

Investments held outside an ISA can also generate dividend income, which may be taxable if it exceeds your annual dividend allowance (currently £500). Whether you pay tax, and how much, will depend on your overall income and tax position.

When the new tax year begins, you could then use your fresh ISA allowance for any new investments if you wish to bring future money back into the tax-efficient wrapper.

I hope this helps give you a better understanding of your options.

What you might like to do next

• Read more about CGT
• Learn more about tax allowances
• Open an Investment Account

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

Read: How do pension rules change when you turn 75?

Read: 4 income funds for your ISA

Read: Top 10 best-selling ETFs in January

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of financial adviser or an authorised financial adviser of your choice.