It is less than a month until the annual contribution deadline for a Stocks and Shares ISA.
On one hand, that might not be seen as a big deal. After all, when one tax year’s allowance ends, another immediately begins.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
But once gone, the previous year’s allowance is gone forever. So, with just weeks left until this year’s deadline, here are three things I think an investor ought to consider when it comes to their Stocks and Shares ISA.
Maximising the current year’s allowance
Some investors will already have paid as much as they can into their ISA for the current tax year and be itching for a new allowance to start.
For many, though, there will be an unused portion (perhaps all) of their current ISA allowance.
Not everyone has the spare cash to top out the allowance each year. But this does strike me as a good time to consider what one might be able to spare before the current allowance finishes in the first week of April.
Reviewing the mechanics of ISA performance
What companies one owns in a Stocks and Shares ISA are obviously a key driver of whether it grows in value, or not.
But another important, though often overlooked, factor can be the mechanics of how a specific ISA works. For example, what is the annual administration fee? What about dealing charges? What about possible withdrawal charges?
Written down in percentage form, these can seem small. But remember: for many investors, an ISA is a long-term investment project. Over the course of decades, even seemingly minor costs can add up substantially and eat badly into investment returns.
So, I think a looming ISA deadline is as good a time as any not only to look into options for choosing the right Stocks and Shares ISA for the coming year, but also to review the costs of one’s current ISAs.
After all, transferring an existing ISA from one provider to another can be an option.
Checking up on share performance
If spending some time to do that, this also strikes me as a convenient moment for an investor to consider how their current choice of shares is performing.
I am a buy-and-hold investor – but sometimes the investment case of a share I own changes and I decide to sell it.
For example, I bought into retailer boohoo (LSE: BOO) because it had a proven business model, had been highly profitable, and had net cash on its balance sheet.
Now, though, things look very different. The company’s interim results for its most recent year show falling revenues. Its adjusted loss before tax more than tripled year on year and it has net debt of £143m. That is equivalent to almost 40% of the company’s current market capitalisation.
I have hung onto my shares (now trading well below what I paid for them) because I still see some hope for boohoo. It has a large customer base, powerful brands, and has built a sizeable logistics infrastructure that can help it compete against online rivals.
Still, if there is no sign of improvement in financial performance at some point I may need to cut my losses and dump this dog from my Stocks and Shares ISA.
I will be keeping a close eye on boohoo’s performance this year.
