Start as you mean to go on…
For those who want to make the most of their cash ISA allowance, now is the time to get ahead of the game and start to plan where to put next year’s ISA allowance. The great news for savers is that the ISA allowance will rise to £20,000, a significant increase and one that shows that sizeable sums can be accrued into a cash ISA, offering tax-free savings both now and in the future.
This is the time of year when traditionally providers compete for savers’ ISA funds by launching improved offers and market-leading interest rates. We have seen this tradition decline over recent years, as less and less providers fight to get to the top of the best buy tables. However, the encouraging news is that whilst last year there was very little activity amongst providers, we have seen some positive movements this year and we hope that this continues into the new tax year.
However, deciding where to place your ISA allowance is not necessarily straightforward. Not only do you need to decide whether to place your funds in a Cash ISA, Stocks and Shares ISA, an Innovative Finance ISA or a combination of the three types, from 6 April 2017, a new type of ISA will be available, the Lifetime ISA. Designed for those aged between 18 and 40 to save towards their first home or retirement, savers can get a Government bonus each year of up to £1,000. For more information on this new type of ISA, click here for our free factsheet.
With the option to save for your retirement, the Lifetime ISA will be attractive to many, with some savers looking for it to either complement or even possibly replace a traditional pension. Of course, this is a complicated area, so we have produced a free factsheet which looks at the differences between these two retirement options and the key points to consider.
Also, there is a further complication when it comes to using your ISA allowance in the form of the Personal Savings Allowance (PSA). Launched in April 2016, the PSA means that basic rate taxpayers do not pay tax on the first £1,000 of savings interest they receive or £500 for higher rate taxpayers. The PSA had led some to question the point of cash ISAs for tax free savings, however cash ISAs remain an important part of a balanced savings portfolio. For more information, call us on 0800 321 3581 to talk to one of our expert savings advisers.
That said, the humble cash ISA is still alive and kicking, offering tax-free interest, whatever the balance held, which if you continue to utilise your allowance each year, can rise to a significant amount.
Don’t forget, now is also a good time to review your current cash ISAs and consider transferring to a better option, if the interest rates you are receiving are not competitive. Ensure you approach the new provider with your transfer request and they will take care of moving the funds for you. However, please bear in mind that not all accounts allow transfers in, so make sure you read the information carefully or contact us for assistance.
If you need help picking a suitable cash ISA or need any assistance with your savings, call us on 0800 321 3581, we’d love to hear from you.