HOUSEHOLDS have just hours left to make the most of their ISA allowances before the start of the new tax year.
ISAs are savings accounts where you don’t pay tax on any interest earned which can make them a better choice than a general savings account.
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But the money allowances you have for them don’t carry over from one tax year to the next.
With the new financial year starting tomorrow, that means if you haven’t maxed out your ISA allowances yet, you should do so now, if you have the cash in the bank.
Alice Haine, personal finance analyst at BestInvest, previously told The Sun: “The most important feature of an ISA to remember is its ‘use it or lose it’ status.
“You cannot carry the ISA allowance onto the next year so those that want to max out their account must complete any transactions by midnight on April 5.”
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Alice said she had known savers to wait as late as 11.55pm on April 5 to add money to their ISAs which causes unnecessary stress.
She warned: “A power cut in a storm, a technical glitch or an online provider that needs time to process your application or add the funds could cause a saver to miss out on valuable tax-free benefits.
“Importantly, midnight is the point when your application process needs to have been completed, not begun.”
Those who haven’t topped up their LISAs to the upper £4,000 annual limit could be missing out on up to £1,000 in free cash too.
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This is because this type of ISA account pays out a 25% bonus on any savings added.
Topping up your ISA is as simple as paying in a lump sum through your provider, such as a bank or building society.
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What are ISAs?
ISAs (Individual Savings Accounts) are savings accounts where you never pay tax on any interest earned.
You can put up to £20,000 into one of the accounts every tax year.
But there are five different types so it’s worth doing your research before opening one so it matches your needs best.
If you’ve got enough money coming in, or saved up, it might be worth opening a general savings account too, as there’s no limit on the amount of money you can put into one.
Here are the five different types of ISAs:
Cash ISAs
Cash ISAs can be opened by anyone 16 or over and you can deposit a maximum of £20,000 into one per tax year.
Again, there are different types, including easy-access cash ISAs, fixed-rate ISAs and Help to Buy ISAs.
Easy-access ISAs let you add money in which can be taken out at any time without a charge.
Fixed-rate ISAs tend to offer higher interest rates than easy-access ISAs, but you will probably have to pay a fee for withdrawing money before the end of the term.
Help to Buy ISAs aren’t available anymore, but if you previously set one up, they are designed to help first-time buyers onto the property ladder.
You can put a maximum of £200 in per month and get a 25% bonus from the government on top.
That means if you maxed yours out with £2,400 this current tax year, you would get £600 from the government.
Stocks and Shares ISA
Stocks and Shares ISAs can be opened by anyone 18 or over and the maximum amount you can put into one is £20,000 per tax year.
There is more risk involved in opening one of these types of ISAs as the money you deposit is invested in shares and bonds.
But, while the value of the ISA can plummet, it can also increase sharply.
Usually, you have to pay a number of fees with a Stock and Shares ISA too, so that’s another thing to bear in mind.
Lifetime ISA
Anyone between 18 and 39 can open a Lifetime ISA and deposit a maximum of £4,000 per tax year into one.
You can keep adding money into one up until you are 50 and must make your first payment into one before the age of 40.
Like with a Help to Buy ISA, you get a 25% bonus on top of any personal contributions.
So if you added £4,000 into one this tax year, you would get £1,000 free from the government.
There are two different types of Lifetime ISA – a Cash Lifetime ISA and a Stocks and Shares Lifetime ISA.
A Cash Lifetime ISA can be worthwhile if you are saving for your first home and are planning to buy within a couple of years.
A Stocks and Shares Lifetime ISA might be more worthwhile if you are saving for retirement.
With any Lifetime ISA, you will have to pay a fee if you want to use the money for anything other than your first home or retirement.
As an example, if you had savings worth £800, you would earn a 25% bonus of £200 on top – bringing your total pot to £1,000.
If you wanted to withdraw the entire pot early, you would have to pay a 25% early exit fee on the full amount – £250.
That means you would end up with £750, effectively losing £50 of your own money.
IFISAs
Anyone 18 or older can open an IFISA (Innovative Finance ISA) and deposit a maximum of £20,000 into one each tax year.
The company offering you one of these ISAs will use your money to lend to borrowers or businesses and the idea is that you get interest back based on the interest rate charged on the borrower’s loan.
‘JISA will be nice lump sum to start daughter off at 18’
NIKKI KNIGHT and husband Ollie have set up a junior Isa for their 11-year-old daughter Sophie.
Mum-of-two, Nikkie, 38, from Lydney, Gloucs, opened up the account when Sophie was born, to build a nest egg for the future.
She said: “It was my dad’s idea to set it up and I chose Tesco Bank’s cash ISA as it had the best rate at the time, which was three per cent. It’s now up to four per cent.
“I’ve got a standing order in place and we add more at Christmas and birthdays.
“It’s nice to get the statement every year and know that the interest is growing over time.
“It’s a little lump sum to start Sophie off, for a deposit on a flat, tuition fees or a car – something we wouldn’t be able to help her with otherwise.
“I also really like the fact the money is locked away and can’t be accessed until she’s 18.”
Nikki runs the blog unicornsdinosaursandme.com, which follows the blood cancer diagnosis of the couple’s six-year-old son, Toby.
But you can lose money through an IFISA if the people you’ve lent to can’t afford to repay the loan.
Another disadvantage is that it can take a while to withdraw money from one.
Junior ISA
Junior ISAs (JISA) can be set up for any child under the age of 18 and living in the UK.
You can save up to £9,000 a year into one of the accounts, and the child can then withdraw the money when they turn 18.
That said, the child can take control of the account when they turn 16.
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