Did you know that you can save up to £15,000 and pay no tax on the interest? The New Cash ISAs (NISA) announced by George Osborne during the last spring budget have made it much easier for people to save money without the hassle of filling in tax returns on the interest accrued and should really be taken advantage of as much as possible. Of course, not everyone is going to have £15,000 to save in any one financial year, but any amount – from £1 to £14,999 – can benefit from being put into an ISA. Using This Year’s Allowance to Your Advantage ISA allowances run from one financial year to the next, so the amount of time left to take advantage of this year’s allowance is nearly up.
The 5th April 2015 will be the last day you can take advantage of the full £15,000 allowance. If you’ve got some money in an ISA or if you’ve never paid in before, now is the time to begin or add to the balance you’ve already got (providing you haven’t hit the £15,000 threshold yet). Withdrawing Your Allowance For the next financial year, which begins on 6th April 2015, the ISA allowance is going up to £15,240.
This allowance is the full amount that you’re allowed to pay in over the course of the year. So if you withdraw money then you’ll only be able to put it back within the same financial year if you haven’t used the allowance up. For example, if you credit your account with £7,000 and then end up taking £3,000 out, you’ll still only be able to add another £8,000, even though this will leave your balance at £12,000 rather than £15,000. It’s all about what gets paid in, not what the balance is. In the most recent spring budget set out by the Chancellor of the Exchequer on the 18th March however, it was announced that this will no longer be the case. A ‘fully flexible’ ISA is in the pipeline and will mean that you can put money back later in the year if you need to withdraw it.
The Early Bird Catches The Worm You don’t have long left to take advantage of this year’s ISA allowance, but it could be well within your interests to do so from a tax point of view. Interest is often paid yearly, so by getting your savings in an ISA by 5th April you could earn much more interest than you could otherwise get elsewhere. It’s important, however, to shop around to ensure that you’re getting the best rate possible. ISA interest rates are not what they were before the financial problems of 2008, but it’s still worth taking advantage of these lower rates, as interest is paid on all of your money, not just on the yearly allowance.
The longer you let your ISA balance build, the more you’ll gain, so why not get in there early and give your savings a boost? Read more about ISA allowances and why they’ve changed on ISAs.com. If you’d like to learn more about ISAs and how they work, visit MoneySavingExpert and check out their factsheet.
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