If you’re looking to make the most of this year’s ISA allowance you may soon be out of time. The deadline for you to take advantage of your £20,000 tax-free allowance is midnight on the 5th of April.
When the deadline passes, your ISA allowance will reset. You cannot use any of your unused allowance from the previous tax year. It simply disappears. The months leading up to the deadline see an increased amount of people opening new ISA accounts and investing more money. This is widely known as ISA Season.
How can I use my allowance before the ISA Deadline?
There are many ways you can use your ISA allowance before the deadline. If you haven’t used any of it so far this year, consider opening a new ISA account. There are multiple ISA options you can choose from.
- Cash ISA
A Cash ISA is great for sheltering your savings from tax, with no risk. It’s also easy to access your money from a Cash ISA, making it a flexible choice.
- Stocks & Shares ISA
A Stocks & Shares ISA is a good way of earning higher interest on your savings, sometimes as high as 9%. The higher interest rate can make a Stocks & Shares ISA more appealing to people than a Cash ISA.
- Innovative Finance ISA
Innovative Finance ISAs offer similar high interest rates to Stocks & Shares ISAs but have more flexibility. In most cases, you can access all current and previous year funds as well as replacing any withdrawn funds in the same tax year.
Your ISA allowance isn’t affected by the number of accounts you have. Regardless of the number of ISAs, your allowance is always £20,000. If you already have an ISA but you aren’t using your full ISA allowance, consider adding a different product to split your money.
Splitting your ISA allowance
Many people like to diversify when saving or investing their money. You could split your tax-free allowance across multiple ISA products. For example: You could save £10,000 in your Cash ISA, invest £5,000 in a Stocks & Shares ISA and use the remaining £5,000 in an Innovative Finance ISA.
As long as the amount of money you place in your ISAs is under the £20,000 limit, you will not pay any capital gains tax on your earnings. Any money held in an ISA that goes above your allowance, will not benefit from tax-free status.
What is ISA season?
The ISA season is the period at the end of and beginning of the new tax year when ISA providers look to generate new customers with more competitive interest rates.
There is also an increased amount of activity from savers, looking to make the most of their tax-free allowance before the ISA deadline hits.
What happens if I don’t use my allowance before the deadline?
If you don’t use your ISA allowance before the deadline it simply disappears. There is no roll-over of the allowance, and you will have missed out on any tax-free benefits from the previous tax year.
How can I open an ISA account before the deadline?
You can usually find a product you like, apply for it and set it up all online and in the space of a few hours. If you want to open any kind of ISA, the best way to start is by checking out online comparison tables to find an account that best suits you and your money.
The Savings Explained Comparison Table is easy to read and compares ISAs from across the market. It’ll make it easy for you to find the best home for your savings before the ISA deadline of 5th April.