I always max out my Isas, but am I missing a trick?

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I’ve always been a loyal saver into my Isa and have used up my full allowances most years, with a mix of cash and stocks and shares. But now the £20,000 limit has been frozen until 2030 I am worried I am missing a trick — are Isas still worth prioritising or should I save my money elsewhere?Susie, Warminster
The Isa has been around for more than 25 years and is still one of the most tax-efficient ways of saving and investing. The amount you can put into an Isa each year may have been frozen at £20,000 until 2030, but they are still worth prioritising as a flexible, tax-efficient home for savings and investments, which can contend with inflation over the longer-term.
You can invest your allowance in cash deposits or the stock market and in many respects the Isa shares similarities with the personal pension, although they are arguably more flexible.
Once cash and investments are held within an Isa, they do not attract income tax or capital gains tax. This tax efficiency allows you to “reinvest” the tax which otherwise would have been paid to HM Revenue & Customs (HMRC) and helps to boost returns over time.
Unlike pensions, the money can be accessed at any time and there are no age restrictions on withdrawals. There is no tax relief on Isa contributions, like there is on pension contributions, but there are also no tax implications to withdrawing the funds, whereas withdrawals from a pension (above the 25 per cent tax-free lump sum) can be subject to income tax.
That being said, it may still make sense to prioritise pensions ahead of an Isa depending on the tax relief available, how much tax you already pay and when you might need the money.
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When assets are held in an Isa there is no need to report anything to HMRC so there is very little administrative burden. Whereas income generated from funds held within a non-Isa cash or investment account (beyond certain allowances) would need to be reported to the taxman.
The annual £20,000 Isa allowance (£9,000 for Junior Isas) is measured by tax year, starting in April, and works on a “use it or lose it” basis, with no ability to carry forward unused allowances.
There are four types of Isa. Cash accounts hold cash deposits that generate interest; stocks and shares accounts house investments; and innovative finance Isas promote peer-to-peer lending and investment in small businesses. Then there are the Lifetime Isas which have an annual contribution limit of £4,000 and are designed for saving for a first home or retirement. This £4,000 limit counts towards your regular £20,000 Isa annual allowance.
Isas can therefore offer a great source of net regular cash flow — for example, in retirement to complement pension income — which allows you to manage your income tax rate.
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From a tax planning perspective, using your Isa every year remains a great choice for anyone looking to save and invest for the long term.
If you have already used up your allowances, then we would encourage any saver to think about allowances within the family that might be available. Married couples have their own annual Isa allowances, potentially meaning that they could put as much as £40,000 a year into tax-free accounts.
Will Stevens is a partner and head of financial planning at Killik & Co