The Stocks and Shares ISA deadline for the current tax year is fast approaching. As the ISA quota is a use-it-or lose-it allowance, I try to make the most of mine every year. Any unused quota isn’t rolled over. It vanishes forever.
I think Stocks and Shares ISAs are one of the best tools for investors. Any investments or savings held within one of these wrappers doesn’t attract any income tax or capital gains tax liabilities. Also, there’s no need to report the transactions on a tax filing. This makes them particularly appealing for higher-rate taxpayers.
Of course, each investor’s tax situation will differ, and just because I like to make the most of my ISA allowance every year doesn’t mean other investors should do the same. It may be sensible to seek advice before making any significant financial decisions.
This year, I plan to use my Stocks and Shares ISA allowance to pick up a basket of stocks I think could do quite well over the next few years.
Stocks and Shares ISA investments
There are two buckets of companies I’m looking at. The first includes businesses like British Airways owner IAG. These are recovery plays that might see an improvement in trading over the next few years as the world moves on from the pandemic.
But these companies aren’t without their risks. If the pandemic drags on into 2022 or 2023, they may continue to struggle. IAG, for example, might have to raise yet more cash from investors.
On the other hand, if the world does get back to normal by the end of this year, these firms may recover quickly, producing significant capital gains. By owning the stocks in an ISA, I will reduce my tax liabilities when it’s time to sell.
The downside to this approach is that capital losses can’t be used to offset capital gains on investments held outside a Stocks and Shares ISA. That’s something investors need to be aware of when buying high-risk recovery plays.
Green revolution
The other bucket of companies I’m planning to acquire for my Stocks and Shares ISA is renewable energy stocks. I think the green energy revolution is only just beginning, and this could be one of the primary growth themes of the next few years.
With that in mind, I’m looking at buying utility SSE, which is investing billions in green energy. I’m also planning to buy shares in the Gore Street Energy Storage Fund. Gore Street is developing battery assets to help the UK electric network deal with the transition to renewables. It’s targeting a 7p per share per annum dividend in the long term.
The most considerable risk these companies face is that they end up overpaying for assets by rushing into renewables. This could lead to reduced profits and lower dividends. However, as the world continues to invest billions in renewable energy profits, I’m excited by their potential. That’s why I’d buy these firms for my Stocks and Share ISA today.