The countdown's on: Last-gasp tips to enhance your ISA allowance
It's important you do not miss out on a year's tax-free savings, and there's no time to waste before the deadline comes into force
Sunday 01 April 2012
With the final day to park up to £10,680 in a tax-free shelter looming on Thursday, investors are being warned to use the individual savings account tax-free allowance, or lose it.
But you're probably wondering what the big deal is and why it is so vital to use the whole of your tax-free allowance. An ISA allows you to protect your money from the tax collector, so interest generated from your cash will be tax free and any capital gains from your investments will also be exempt from tax.
At a time when interest rates are stuck at record lows of 0.5 per cent, you'll still be wiser to put your hard-earned cash in an ISA, than see it taxed in an ordinary savings account. It means if you are a basic rate tax-payer, you won't get charged the 20 per cent rate on your savings interest in an ISA, and if you pay tax at a higher rate, you won't be hit by 40 per cent tax.
You may be thinking this message of "use it or lose it" is starting to sound like a stuck record, and what difference can a year of saving make? Using your full allowance every year compounds your tax-free savings, helping your money to grow more over the longer term. It could mean the difference between a financially comfortable retirement and one that isn't comfy at all.
"Everyone focuses on how it's so important to put money away and use your ISA allowance, but why is it so important?" says Catherine Penney at Barclays Stockbrokers. "If every year you put money into an ISA, you take it out of the tax bracket. Each year in isolation doesn't have much of an impact but building up a tax-free portfolio over time is crucial."
there is still time to put away your money and consider certain tips to help you maximise your savings. If you are keen to put cash to work in a stocks and shares ISA, but don't know where to invest before the deadline, don't panic.
"A number of stocks and shares ISA providers offer a 'cash park' option whereby your stocks and shares ISA can stay in cash pending investment," says Jason Witcombe at Evolve Financial Planning. "If £10,680 is a lot of money to you, it is not wise to rush the decision on what funds it is invested into. Using the cash facility buys you time and gives you the option of spreading the time over which you put this money into the markets."
But it is important you don't jump head-first into a fund just because the clock is ticking. Although the universe of investment products appears never-ending, you should make a list of key investment criteria to help whittle down the relevant funds, and seek an independent financial adviser if needed. "Choosing a fund that is right for you, not one recommended by a neighbour or a friend, is key," says Philippa Gee, of Philippa Gee Wealth Management.
"Just because a fund is right for someone else, does not mean it is right for you, as the risk may be too high."
If you are keen to invest on an ethical basis, for example, there are certain investments which will be more suited to your needs. "The Jupiter Ecology fund is a good option for ethical ISA investors," says Danny Cox at Hargreaves Lansdown. "The year ahead could be an interesting and potentially rewarding one for ethical investors."
Or, if you have an above-average appetite for investment risk and are willing to experience a potentially bumpy ride, Mr Cox says the Junior Oils Trust could be an attractive offering. "The fund invests in higher-risk smaller companies involved in the oil industry," says Mr Cox.
Another tip for investing to maximise your money is to try to keep costs to a minimum, which means looking at charges. Using lower-cost tracker funds or exchange-traded funds is one way, and leaves more of the market's return in your pocket than with the fund manager.
While it seems there is a lot of decision making for investment ISAs, those with cash ISAs should not just sit back and relax. You need to keep an eye on the rate you are receiving if you want to make the most of your ISA allowance, otherwise your cash could be generating very little bang for your buck.
Even if you can't fill this year's ISA amount, putting in as much cash as possible will still help significantly over the long term. So with four days to go, make sure you use, and don't lose, your allowance.
Emma Dunkley is a reporter at citywire.co.uk
Expert view: Danny Cox, Hargreaves Lansdown
"The Budget has reminded investors of the importance of using their ISA allowance.. Those who are undecided where to invest can still subscribe to an ISA and park their money in a cash trading account, until they are ready to invest. Opening an ISA by telephone or online usually takes less than five minutes but the transaction has to complete by midnight. Last year, some people left it too late and missed out forever."
Diving in at the deep end is no excuse for shirking the style stakes
Consumers given power to choose a green deal
'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers
Bargain Hunter: Eurostar offers child fares for £1 each way to Paris, Brussels and Lille
Relaxed pensions rules: Guide to what they mean to you
Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans
- 1 Why I'm on the brink of burning my Israeli passport
- 2 Comfortable in their own skin
- 3 Japanese plant experts produce 10,000 lettuce heads a day in LED-lit indoor farm
- 4 War is war: Why I stand with Israel
- 5 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square