The Stocks and Shares ISA deadline is rapidly approaching. Investors are allowed to put £20,000 a year into an ISA, but this is a ‘use it or lose it’ allowance. The allocation does not roll over to the new tax year.
As such, investors have until 5 April to use up as much of the allowance as possible. I like to use as much of my allowance as possible every year. Some years, I cannot obtain the entire £20,000 balance, but I can put away a significant sum.
I do not see any reason to invest outside of a Stocks and Shares ISA wrapper, considering the tax benefits of using this product. Any income or capital gains earned on investments held within one of these accounts is not liable for further tax. I do not even have to declare the income on my tax return.
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.
Due to these tax benefits, I try to make the most of my account allowance by investing in a portfolio of both income and growth stocks.
Two blue-chip companies I would like to buy for my portfolio ahead of the allowance deadline are AstraZeneca and GlaxoSmithKline.
Stocks and Shares ISA buys
Both of these companies have different attractive qualities. Glaxo is an income champion and the upcoming spinoff of its consumer healthcare business should unlock a lot of value for investors.
Meanwhile, Astrazeneca has been focusing on building out its treatment portfolio in recent years. City analysts are expecting the group to report substantial earnings growth over the next five to 10 years as the corporation’s portfolio of oncology drugs hits the market.
Unfortunately, growth at either of these companies is not guaranteed. The pharmaceutical market is highly competitive and regulated. This could have an impact on profit margins and growth as we advance.
Alongside these high-quality blue-chip stocks I would also buy an investment trust. I am looking for those that have the potential to provide both income and capital growth.
The City of London Investment Trust is a perfect opportunity, in my opinion. The trust is one of the highest-profile equity income funds on the market.
It currently offers a dividend yield of around 5% and owns a portfolio of high-quality blue-chip stocks, which could also provide capital growth. Despite these qualities, it does charge a management fee. This fee could have an impact on my returns in the long run.
It also has limited international exposure, which could be an issue if the UK economy starts to struggle.
Despite these risks and challenges, I would add the investment trust to my Stocks and Shares ISA. considering its income credentials and growth potential.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.