The new tax year is fast approaching, and that means many people will be thinking about their ISA for the year ahead. The question is, have you made the most of this year's allowance – and do you even know what it is?
According to research from Santander, just 8% of those surveyed plan to utilise their full £15,000 ISA allowance by the end of the tax year, with many saving far less than the maximum. Instead, the average amount savers expect to have deposited stands at £4,210, or 28% of the limit.
This could simply be because the majority of savers don't have the level of disposable income necessary to make full use of their allowance, but it could also come down to a lack of awareness over what the limit actually is, with 74% either mistaken about, or unaware of, the current allowance following its increase in July last year.
The ISA sector enjoyed a huge shake up in 2014 with the limit being dramatically increased. The previous allowance was set at £11,880 with a maximum of £5,940 able to be held in cash, but as of 1 July 2014, this all changed to the current system – now, £15,000 can be held in an ISA, and it can all be held in cash should you wish.
This change opened up far more flexibility for savers, not to mention the opportunity to shelter more cash from the taxman, and for those who are aware of the changes, the impact has been largely positive. The survey found that 18% of respondents save more as a result of the higher allowance, and 10% are more likely to shop around to find a competitive rate. Is it time you joined them?
If you've yet to make the most of your allowance for this year, it's high time you did! When the new tax year starts your allowance will be re-set, so if you can channel any extra savings into an ISA before the deadline, it'll definitely be worthwhile.
According to the survey, a lot of savers are planning to do just this. A last-minute rush is predicted before midnight on 5 April, with 27.6% of people planning to open a cash ISA, transfer funds to a new one, or add funds to an existing ISA between now and the deadline. Indeed, around 18% plan to open a cash ISA for the first time, but whether you're an ISA newbie or a seasoned investor, you need to make sure you find the account that can really make the most of your savings.
Having the right ISA to suit your needs really is crucial, and it all comes down to your individual circumstances. If you think you may need access to your cash, opt for an easy access account that permits withdrawals, or if you're happy to tie up your money for the promise of better returns, consider a fixed rate ISA instead.
Of course, there's always the possibility that you've got a healthy savings pot that's currently separate from an ISA, and if that's the case, it could be time to consider making the switch. Analysis from NFU Mutual, using official data from the Office for National Statistics, shows that less than half of UK adults (46.8%) have an ISA, yet more than five million are paying tax unnecessarily by keeping their savings in a traditional savings account. Don't be one of them!
Keeping your savings in a tax-free ISA is the only way to keep your interest away from the taxman, so opting for this kind of account should always be your first port of call. Check out our best buys to see if you can make the most of your ISA allowance before the deadline hits.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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