How to maximise the yearly ISA allowance?

As the new tax year approaches(runs from 6 April to 5 April), it is important to take the time to review your Individual Savings Accounts (ISAs) to ensure that you are utilising your savings allowance.

What ISAs are available?

Currently, an individual can put a total of £20,000 into their ISA accounts in a tax year – this can be in either a single account or split across a maximum of four accounts. The different ISA accounts are as follows:

Cash ISAs – works like a traditional savings account, individuals can put money into their cash ISA, any interest gained is tax-free. You must be 16 or over.

Investment ISAs – individuals can invest some or all of their money into a variety of assets (shares, bonds, property) and you do not pay income or capital gains tax on any gain made. You must be 18 or over.

Innovative finances ISAs – enable you to become a lender to approved individuals and businesses: an individual can invest their money into peer to peer (P2P) lending schemes in return for a fixed amount of interest over a set time. You must be 18 or over.

Lifetime ISAs – designed to help you save for later life or first time home buyers (of property worth up to £450,000). You must be over 18 and under 40 years of age.

You can pay into your account a maximum of £4,000 per year.

The Government will add a 25 per cent bonus to your savings (up to a maximum bonus of £1,000 per year).

If you withdraw money (before the age of 60) from this account for any reason other than buying your first home, the Government will charge 25 per cent.


What about the Help to Buy ISA?

Individuals can no longer open a new Help to Buy ISA. If you have one open you can save into your Help to Buy ISA until the 30 November 2029. You then have until 1 December 2030 to claim your bonus.

This was also designed for first time home buyers (of property worth up to £250,000 or £450,000 in London). The Government adds 25 per cent to the amount you pay in for a maximum bonus of £3,000.

The maximum you can pay into a Help to Buy ISA is £12,000 and the minimum is £1,600 to claim your bonus.


What to do before 5 April

ISA allowances cannot be backdated or carried forward. Once the new tax year starts the allowance will reset and any unused allowance will be lost.

It is advisable to review if any additional funds can be put into your ISA accounts before the tax year ends. Whilst many are not able to utilise the entire allowance, it is best to put in as much as you can.

If you have not yet opened any ISA accounts, there is still time to open one before the end of the tax year.

For help and advice with any aspect of wealth management then contact one of our experts today.


*It is important to remember that when investing into a non-cash ISA, your capital invested can go down as well as up and you may not get back the original capital invested.*

Posted in Blog, Financial Planning.