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How to make the most of the new tax year

How to make the most of the new tax year

Category: ISAs

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Today marks the start of the new tax year, and that can only mean one thing – it's time to think about your ISA allowance! Here are a few pointers to help you make the most of the 2017/18 tax year and get the best possible returns.

  • Know your limits. This year you can invest up to £20,000 in an ISA, be it in cash, stocks & shares, an innovative finance ISA, a Help to Buy ISA, the new Lifetime ISA, or a mixture of the above. Up to £4,128 can be invested in a Junior ISA for younger savers, and those aged 16 and 17 can get a double whammy – not only do they get the 2017/18 Junior ISA limit, but they can take advantage of the adult cash ISA allowance, too!
  • Start early. If you've got the cash ready to be funnelled into an ISA, why wait? Investing sooner rather than later means your investments will be kept out of the taxman's reach for longer, and the effects of compound interest will be even more marked. The earlier you invest, the more tax-free interest you could accrue, and the snowball effect means those earnings will generate even more! As an added bonus, fixed rate ISAs tend to offer better rates than their easy access counterparts, so locking away your ISA allowance now could pay off in the long run.
  • Get into the savings habit. If you don't have a lump sum to invest just yet, you may want to look to easy access ISAs, which allow you to add funds throughout the year. Alternatively, stocks & shares ISAs often allow you to make regular payments, which can be especially beneficial in the investment arena – buying shares throughout the year means you're not buying everything at the same price, which can help to smooth out market volatility. Either way, you could soon get into the savings habit, and if you set up a monthly standing order so a set amount goes straight into your ISA, you may not even miss it!
  • Find the best rates. The best way to make the most of the tax year and truly maximise your returns is to find the best ISA rates possible. Check out our Best Buys to get started, and remember that if you opt for a fixed rate ISA, you'll often be able to find far better rates (unless you're eligible for a Help to Buy ISA, which beat even fixed rate deals).
  • Consider stocks & shares. We've already touched on stocks & shares ISAs, but if you're yet to seriously consider it, now could be the time! They offer the potential for better returns than their cash counterparts, and while you'll need to balance that against the potential of being left with less than you put in, if you're willing to take that kind of risk (and do the necessary research to choose your funds wisely) they could be worth considering - particularly given that they've just seen the best returns in seven years.

  • It isn't all about ISAs. ISAs tend to grab the headlines when it comes to tax year limits, but it isn't all about these accounts. A new tax year means you may need to think about anything from pension allowances to capital gains tax; find out more by investigating our Tax Tables.

So, are you ready for the new tax year? It's time to get started - read our tax year overview and check out the best cash ISA rates to maximise your tax-free potential and have the best possible start to the year.

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.