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Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

ISAs (individual savings accounts) are powerful tax-efficient saving and investing tools. Yet there are many different types, each with unique features and rules. How can an early-stage investor use them to maximum effect when building a portfolio?

Below, our team at Bure Valley Group offers a short guide to ISAs in 2024, including some thoughts on the newly announced “British ISA.” We hope these insights are helpful to you.

To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page. For enquiries regarding our latest projects and funding, you can reach us via:

+44 160 334 0827

[email protected]


What are ISAs?

The ISA was introduced by the British government in 1999 to encourage saving and investing via an attractive set of tax perks. In 2023-24, a UK tax resident can contribute up to £20,000 per tax year to their ISAs and receive tax-free investment growth.

There are different types of ISAs serving different purposes. The Cash ISA is perhaps the most well-known, acting similar to a regular savings account. However, the saver can generate tax-free interest from inside it.

The Stocks & Shares ISA is another popular choice. This allows an individual to invest in a range of “mainstream” equities and bonds, such as FTSE 100 companies and UK government bonds (gilts). Any returns generated will be free from capital gains tax (CGT) and dividend tax.

The Lifetime ISA is targeted at people looking to retire or buy their first house. Up to £4,000 can be contributed to it each tax year, and the UK government will “top up” contributions by 25% (up to £1,000 each year). 

The Innovative Finance ISA is targeted at individuals who want to invest in startups and other early-stage companies. This might be done via peer-to-peer (P2P) lending

Finally, there is the new British ISA. Details are still coming out about this, but the Chancellor has said that an investor can “extend” their ISA allowance by £5,000 each tax year by investing in UK assets. We will know more when the consultation ends in June 2024.


How should I use an ISA?

The specific ISA(s) you should use depends on your unique financial situation and goals. For instance, if you are looking to build up an “emergency fund” of short-term savings (e.g. covering 3-6 months’ worth of living costs), then a Cash ISA could be a tax-efficient option.

Conversely, someone who is thinking about retirement might want to look at the Lifetime ISA. Here, an individual can contribute between the ages of 18 and 50. During that time, the government can provide a 25% annual “top-up” to the contributions. Once the individual reaches age 60, the money can be withdrawn. 

For early-stage investors, the Innovative Finance ISA is an interesting option. Startups can offer high growth potential, so holding these investments within the ISA “wrapper” can be a powerful way to keep your hard-earned returns. 

However, you need to think carefully about whether P2P lending is right for you. Some investors may not have the risk appetite. Others may prefer angel investing as their preferred route for investing in early-stage businesses.


How to use ISAs effectively

It is important to think about your broader tax plan when using ISAs to generate tax-efficient investment growth. Remember, a UK tax resident is also entitled to various tax allowances outside of an ISA. Consider how you can use these strategically to maximise your ISAs.

For instance, a Higher Rate taxpayer is entitled to earn up to £500 of tax-free interest each tax year (via their Personal Savings Allowance). Therefore, he may wish to hold his “emergency fund” in a regular savings account – assuming he has no other interest-generating investments outside of ISAs. This is because the interest earned from the emergency fund is likely to fall within his £500 PSA. As such, the full £20,000 ISA allowance can be used for other investments, such as those in a Stocks & Shares ISA.

Be careful to think about your asset base and how to structure things effectively using ISAs. For example, many equities and bonds can be held within an ISA. However, crypto investments and Buy to Let (BTL) properties cannot. Therefore, an investor may wish to focus her tax allowances (he Annual Exempt Amount for CGT) on the latter types of assets.

A final area to consider is inheritance tax (IHT). In 2023-24, investments held within an ISA are not automatically exempt from IHT upon the estate owner’s death. However, certain strategies can help investors to mitigate this. In particular, investing in AIM (Alternative Investment Market) shares via an ISA could qualify for IHT exemption if they qualify for Business Relief.

For many successful investors, however, there will be limits to the utility of ISAs due to the £20,000 annual “cap” on contributions. As such, early-stage investors may wish to explore additional tax-efficient options, such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), when builing their portfolios.



Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? 

Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]

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