It certainly seems that the crisis is going to carry on for many weeks, probably months, but although Chancellor Rishi Sunak announced many measures, both in the March 11 budget and subsequently, he has not changed the tax year deadline, or the allowances for the current year. The allowances (particularly for pensions) are generous—if you consider that cash savers hunt around hard for even a 2% return, it is clearly foolish to ignore the government’s one-time 25% uplift!

There are two main things to consider: 

The first is your annual pension allowance, which for most people* is up to a maximum of £40,000. This attracts tax relief at your highest rate, so for example a basic rate taxpayer earning £40,000 could pay as much as £32,000 into a pension scheme and the government will top it up by 25% to £40,000.

The second is simpler, your annual ISA allowance. All growth (interest, dividends, capital gains) in an ISA are tax-free. The clock also ticks on specialised ISAs such as LISAs (saving for house deposits) and JISAs (saving for children or grandchildren).

But is now the right time to invest, you may ask. Global stock markets and some other asset classes have plummeted in recent weeks due to COVID-19. We watch the markets regularly and whilst the virus cases continue to grow, nobody can say with any conviction that the markets have bottomed.

The way out is to take your allowance in a (FSCS-protected) cash investment product. Obviously, the interest you will make between now and the end of the tax year is virtually nothing, but the capital is safe. The monies invested can then be moved into higher yielding but possibly riskier investments after April 5 when the investment outlook becomes clearer. 

But you need a pension scheme or ISA wrapper product which allows you to hold cash or investment funds. Many don’t, they are cash-only or fund-only. Moving funds later to a different product involves fees, so it is best to get it right first time. Here at Markland Hill Wealth, we can provide flexible products which can accommodate both cash and various investment funds.

We are obliged to advise investment products based on your attitude to risk. However, this process can initially be done very quickly if you are choosing a cash account, and we can then review matters later, as detailed above. At the time of writing, the allowance deadline is only two weeks away. Contact Mike Johnson now on 07860 442799 or email him at mike.johnson@marklandhillwealth.co.uk

Also as a special COVID-related offer we will not charge a fee for setting up a cash ISA or pension before April 5th, nor will our provider. Fees will apply when we do a full investment review and direct your money to optimal products. Our first consultation is always free of charge anyway.

*reliefs are different for higher-rate taxpayers, high earners (over £150,000), people with large previous contributions, and the self-employed. Our advisers can quickly determine your own maximum contribution. The ISA allowance is £20,000 per year for every adult, with no carry forwards.