Three more days to use your tax allowances

Putting savings into an Isa before midnight on Saturday will be a profitable move

Personal finance editor

You have until Saturday to take advantage of the tax allowance for the current 2013-14 tax year. It ends on Saturday 5 April. If you’re asking “so what?”, bear in mind that UK taxpayers waste as much as £4.7bn every year by being inefficient with tax and not making the most of the allowances that the government hands them.

In fact, the average amount each taxpayer wastes is £161, according to research by Unbiased, a site that promotes professional advice. For starters, it says some 49 million bank account holders will waste more than £1.1bn by not moving their money into tax-efficient individual savings accounts. If you have savings or just some money on deposit, then not putting it into an Isa will cost you. How? Simply because you pay tax on savings kept outside an Isa.

The tax is charged at your normal rate. So if you’re a standard taxpayer, 20 per cent of the interest you earn on your savings is handed to the government. If you’re a higher rate taxpayer, you’ll lose 40 per cent of your interest.

Put it this way, if you have £5,000 of savings and earn 3 per cent, you’d get £150 interest in an Isa. Outside you’d get either £90 or £120, depending on your tax rate. If that extra £60 (or £30) doesn’t seem worth the bother then bear in mind that it really is very little bother opening an Isa. You can do it online very simply.

Anyone over 16 can have a cash Isa while you need to be 18 to have an equity Isa, where your savings are put into shares or investment funds. You can put up to £11,520 into the latter, or half that figure (£5,760) into a cash Isa in the current tax year.

However, from 6 April the allowance climbs to £11,880 (or half that in cash) before the new Isa (announced in the Budget earlier this month) comes into effect in July, when you’ll be able to top up the total to £15,000, in cash or equities.

If you have a fair amount of savings, it’s worth moving fast to use this year’s allowance. if you haven’t used it by midnight on 5 April, it’s lost.

Which Isa should you choose? If you simply want a cash Isa look for the highest-paying one. If you want an equity Isa then you should think carefully about which one.

Jason Hollands, of Bestinvest, advises don’t hurry to select your investment. “A rushed decision on which asset class, market or fund to invest in could backfire,” he warns.

John Blowers, head of Trustnet Direct, suggests avoiding one share or fund, as it increases risk. “A portfolio should spread exposure around various geographic markets and assets, helping balance out the peaks and troughs. With talk of a market correction still rife, this takes on added significance.”

If you have kids or grandchildren then there’s a Junior Isa where they can build up cash free savings. You can invest up to £3,720 per tax year into a Junior ISA and once opened, any friend or family can contribute. In the next tax year the allowance climbs to £3,840 on 6 April and then to £4,000 from July.

There are more complicated tax-free investment opportunities such as enterprise investment schemes and venture capital trusts. But these can be very high-risk and should only be entered into after discussing them with an expert.

However, you could also be more tax-efficient by planning for future inheritance tax demands or avoid paying unnecessary capital gains tax.

“You can crystallise gains from selling assets of up to £10,900 this tax year without having to pay any tax,” points out Mr Hollands. “The CGT allowance is often overlooked.”

If you take profits on investments above £10,900 a year you’ll be charged tax at either 18 per cent or 28 per cent. You have to pay capital gains tax on profits made from selling assets, the most common of which are shares, unit trusts or buy-to-let property.

To avoid any last-minute problems, invest online – most Isa providers will still accept applications up to about 11.30pm on Saturday night. You’ll need to have applied by then to allow time for it to be processed by the  midnight deadline.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
people
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Sport
football
News
The dress can be seen in different colours
weird news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Jemma Gent: Year End Accountant

    £250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

    Jemma Gent: Management Accountant

    £230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

    Day In a Page

    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003
    Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

    Our woman in Beijing builds a new relationship

    Britain's first female ambassador to China intends to forge strong links with growing economic power
    Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

    Courage is rare. True humility is even rarer

    Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
    Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

    Alexander McQueen's astonishing vision

    Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
    New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

    Dinner through the decades

    A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
    Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

    Philippa Perry interview

    The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
    Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

    Bill Granger's Indonesian stir-fry recipes

    Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
    Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

    Harry Kane interview

    The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
    The Last Word: For the good of the game: why on earth don’t we leave Fifa?

    Michael Calvin's Last Word

    For the good of the game: why on earth don’t we leave Fifa?
    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?