ISA allowance – use it or lose it!

The end of the tax year is coming up (5th April) so if you haven’t made use of your ISA allowance yet then don’t leave it too late.

The limits for this year are £11,520 for adults (of which £5,760 can be into a cash ISA) and £3,720 for Junior ISAs. Unused allowance cannot be rolled over, so if you don’t use it by the deadline then you lose it forever.

ISAs offer a straightforward way for you to save or invest without having to pay tax on the interest or investment returns. Cash ISAs can be a great place for short-term savings or rainy day money, while Stocks & Shares ISAs tend to offer better long-term returns but with ups and downs along the way.

Like all financial products you should review your ISAs on a regular basis, to make sure you are still making the most of your money. The current rate of inflation is 1.9% (CPI – January 2014) so unless you are getting a return (or an interest rate) above this you are effectively losing the value of your money. You can easily transfer funds from an existing Cash ISA to a new one to get a better rate, or into a Stocks & Shares ISA if the money is for longer-term purposes and you are prepared to take some risk.

The Bank of England has hinted that interest rates are going to stay low for the foreseeable future, so bear in mind that keeping substantial funds in cash may not be the best option. And don’t assume that your Stocks & Shares ISA is doing well just because it has gone up – some older ISAs offer very poor value compared to newer products with lower charges and better investment options.

This is a good time to review ISAs as you can make use of both this year’s and next year’s ISA allowances in a short space of time. The new ISA limits for next tax year (from 6th April) have been confirmed as £11,880 for adults (of which £5,940 can be into a cash ISA) and £3,840 for Junior ISAs. This will then increase to £15,000 from 1st July (£4,000 for Junior ISAs), as announced in the recent Budget.

The value of your investment can go down as well as up and you may not get back as much as you originally invested.

For further information or to arrange a free review of existing ISAs, please contact Emma Greer; tel 07885 407604 or e-mail emma@freedom-financial.co.uk.

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