IT’S ISA TIME AGAIN

Tags: Cash ISA, 5 April deadline

ACT FAST TO MAKE THE MOST OF YOUR TAX FREE ALLOWANCE

Savers yet to make use of their Individual Savings Accounts (ISA) allowance for the 2011/12 tax year should act quickly in order to benefit from tax free opportunities as the April 5^th deadline approaches, advises Colin Bradley, deputy chief executive of local mutual, Loughborough Building Society.

“With savings rates remaining at low levels, it is essential that each individual makes the most of their annual tax free ISA allowance,” urges Colin. “The amount of the tax break may initially seem low but as the balance grows so does the tax benefit.”

What are the benefits of opening a Cash ISA account?

A Cash ISA is a simple, tax free savings account which is available over the counter at most financial institutions. Interest is paid gross, without any deduction for tax, and therefore this is a real opportunity to protect savings from the taxman. It should be everybody’s first port of call for savings in each tax year, but only one Cash ISA can be used in each tax year.

How much can you pay into a Cash ISA?

In the current tax year to 5^th April, anybody aged 16 or over can invest up to £5,340 in a Cash ISA. From 6^th April this annual limit increases to £5,640 as part of the government’s drive to encourage the savings habit.

These maximum limits relate to amounts deposited and if the maximum amount is invested and a withdrawal then made, a further investment cannot be made to replace the amount withdrawn.

Who can have a Cash ISA product?

All individuals in the UK aged 16 or over, but ISAs are only available in sole names, not joint accounts. Initial account opening balances are kept low, to encourage all qualifying individuals to open an ISA account and start the savings habit.

Over 20 million people have now reportedly opened a Cash ISA account since they were introduced in 1999, reflecting the simple, easy to understand, tax efficient account that is an ISA.

Can investments be made on a regular or lump sum basis?

Investments into an ISA can be made in any form. A lump sum payment can be made, investments can be irregular or alternatively the account can be used to save a regular amount each month. The only restriction is that total amount deposited cannot exceed the annual limit for each tax year.

What about other tax free options?

ISA investments are often compared to other tax free investments, notably pension schemes. The key benefits of an instant access Cash ISAs can be summarised as:

• The amount invested is tax free for life.
• The system is simple, no investment decisions, charges or tax returns to complete.
• Easy access to amount invested at all times.
  

And finally

Investors only have until Thursday 5^th April if they wish to invest in an ISA product in this tax year. If your annual ISA allowance is not used by this date it is lost so don’t leave it to the last minute.

The new tax year starts on the 6^th of April, which this year falls on Good Friday and is therefore a bank holiday.  Many institutions will be opening on Easter Saturday to allow investors to start their 2012/13 ISA investments.

Colin Bradley