The end of yet another tax year is fast approaching and with that comes some important dates and facts for customers with Individual Savings Accounts (ISAs).
Firstly, the 2009/10 tax year ends on Monday 5th April and it’s definitely worth bearing this date in mind if you currently have an ISA savings account because you have between now and this date to use as much of your 2009/10 ISA allowance as you can.
ISA Allowances
Each tax year, all UK citizens aged 16 and above get an ISA allowance set by the government. This allowance, which is only available to use in the one tax year and does not roll over, is the amount you can save in an ISA during the tax year. The great thing about ISAs is that any interest you earn on your money is tax-free, meaning that you get to keep up to 50% more (depending on the tax band you are in) of the money you earn on your savings.
If you are aged 16 to 49, your ISA limit for the 2009/10 tax year is a total of £7,200, with a limit of £3,600 applying to any savings in cash. You can, however, use the full £7,200 limit if you invest in a stocks and shares ISA, or you could do a combination of £3,600 in cash and £3,600 in stocks and shares.
From October 6 2009, the total ISA allowance limit for anyone aged 50 and above (and any UK citizen who will turn 50 on or before 5 April 2010) increased to £10,200, with a maximum of £5,100 saved in cash.
Save, save, save and keep your interest away from the taxman
Our message to you is to try and save as much as you can in an ISA before the end of the tax year (in 26 days) because once your allowance is gone, it’s gone for good and it won’t be added on to the next tax-year’s allowance.
If you currently have some money put by, whether it is in the house under the mattress or in another type of savings account, you may want to consider putting it in an ISA as soon as possible so you can start making the most of tax-free savings.
You can only open and invest in one Cash ISA account and one Stocks and Shares ISA per tax year so you could open one now, use up your allowance for this year (before April 5th) and then add to it starting from April 6th using your 2010/11 ISA allowance (which incidentally goes up to £10,200 for those under 50 from April 6th 2010).
ISA access
I myself have an ISA and remember the questions I had when I first opened mine. My particular fear was that I wouldn’t be able to get to my money when I needed it. I then learned that you can get instant access ISAs just as you can get other types of instant access savings accounts and have been able to access my money when I have most needed it without any hassle from my bank. I can even view my ISA account balance online and transfer money to my other bank accounts.
If you do withdraw money from your ISA…
The only thing to remember if you do remove money from an ISA is that the amount of your allowance you have used will remain the same regardless if you remove money (because of this I try to only take money from my ISA if I need a lump sum in an emergency).
In case that appears a bit confusing (it did to me at first), let’s say you are 35 years of age and have saved £3,600 since April 6th 2009. You then take out £600 in October 2009 (for example) and are left with £3,000 in your ISA. In this case, you will not be able to bring your balance back up to £3,600 before April 5th 2010 because you have already saved a total of £3,600 in the 2009/10 tax year.
