Here’s what I would do when there was bad news about the ISA limit

The Budget disappointed millions of investors with its news about ISA limits. The Chancellor announced plans to retain this decision yesterday (31 October). Annual allowance for ISA contributions the same until at least the next decade.

Given the impact of inflation, this probably spells bad news. Annual deduction in ISA allowance for years to come, literally.

Still I guess one JESUS It can be a useful investment tool. I’m holding one Stocks and shares ISA and the annual contribution limit here will remain at £20,000. For many investors, this is more than enough.

Here’s how I plan to react to the news that the ISA limit will be frozen for the coming years.

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Focus on positive potential

Many people do not even contribute their full ISA allowance each year as it stands. So whether the limit increases or not will not make any difference for them in practice.

The budget was a good incentive for me to think about how I could make the most of my existing ISA allowance. Even if it’s worth £20,000, it still offers me a significant opportunity to invest in the stock market in a tax-efficient way.

Keeping money inside ISA wrapping

A frozen limit also reminded me of the value of keeping money within the ISA once it is there. Specifically, if I earn dividends or make capital gains by selling shares for more than I paid for them, I may be tempted to withdraw that money from my ISA package.

But these funds enjoy tax benefits while remaining within my Stocks and Shares ISA. Once I take these out, I will use some of my ISA allowance if I want to put the same amount back in in the future.

I could potentially invest by taking a smart approach to this More than £20k through my Stocks and Shares ISA in any tax year, even if I do not exceed the annual allowance of £20,000 new contributions.

Creating wealth by buying great stocks

When the dust settles on the budget – and long after – I will do what I always do. I will look to build wealth by filling my ISA with great shares that I buy at attractive prices and hold for the long term.

As an example, here is a UK share I bought this year: philtronics (LSE: FTC). Share price increased by 759% in the last five years. So it may not look like I’m making too many bargain buys in 2024.

But I think the company can move on. Many contracts have been signed with SpaceX this year. In fact, the business is seeing such demand that it added a second production line in the summer and plans to add another production line this month.

Overexpansion could be costly if customer demand drops, and this is a risk for Filtronic. But I think SpaceX contracts could be a game changer in business.

SpaceX’s US company strengthens existing gateway connections starlink provision of the satellite network as well as new components. As Starlink expands, this could mean more orders for Filtronic and a strong use case to help attract other customers.