Important information - The value of investments can go down as well as up, so you may not get back the amount you originally invest. Tax treatment depends on individual circumstances and all tax rules may change in the future.
The current turmoil created by Coronavirus has reminded us how important it is to have solid plans in place if the worst happens.
Our success in pulling out of this crisis will depend on how well we were prepared going into it. That’s true of the health service but also true of the economy. Businesses and individuals that have taken steps to shore themselves up for the difficult - but hopefully short - period of disruption ahead will cope better. Concentrating on basic fundamentals will be key.
The sharp market falls we’ve seen force us to take a long-term view. Action we take, or don’t take, now will determine how well we recover on the other side.
Bear that in mind as we head towards the end of the tax year - a year like no other in memory. The one silver lining from a correction in the market is that prices are supressed for those still able to invest, meaning they can make the most of any recovery that comes as long as they can maintain their contributions to investments.
Another way to take full advantage of the recovery is to limit the amount of tax you’ll pay in the future on investments made now. We all have an allowance of money that can be paid into investments with no tax liability. ISAs - or ‘Individual Savings Accounts’ - shelter any money within them from tax, and we can each pay in £20,000 into ISAs each year.
But this allowance expires at the end of the financial year on 5 April - any allowance you don’t use will be lost forever. Now is the time when savers and investors would normally look to make the most of their tax-free allowance. While there’s certainly a lot else to worry about right now, neglecting to make maximum use of your allowance this year could be a mistake.
The dramatic falls in the market since the virus struck make investing now a more challenging decision, but with prices supressed and valuations attractive by historical standards, those investing on a sensible time horizon of at least 5 years should be optimistic that the economic disruption will have time to work through markets.
Those who are put off from making new investments by volatile markets should be aware that they have the option of opening or contributing to a Stocks and Shares ISA and simply holding your money in cash for the time being, before choosing to invest it in markets at some point in the future. Choosing to do this means you’ll be able to secure your allowance for this year, without feeling rushed into making an investment decision right now.
It can be hard in times like these to see past the crisis to a brighter future, but we should all be optimistic that normality will return one day soon. When it does, sensible panning decisions made now will pay off.
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Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. 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 an authorised financial adviser.
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