ISA allowance: Use it, don’t lose it

You’ve got less than a week to use this tax year’s ISA allowance, or you’ll lose it forever.

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You can invest up to £15,000 in a 2014/15 ISA before April 5, either in cash or stocks and shares, or a combination of both.

If you miss the deadline, your allowance for this year will be lost for good.

Next tax year, which starts on April 6, you’ll have a new £15,240 ISA allowance.

Remember that, if you’re a first-time homebuyer planning on saving into the government’s new Help to Buy ISA, you won’t be able to have a cash ISA as well.

You can find out more about Help to Buy ISAs here.

Where to find the best cash ISA returns

If you want to use your allowance to invest in a cash ISA, you’ll need to decide whether you’ll need regular access to your money.

If you don’t, your best bet is a fixed rate ISA. These usually pay higher returns than easy access ISAs because you agree to lock up your cash for a given period.

Number-crunching by MoneySuperMarket found that the average rate on the top five fixed rate ISAs is currently 2.2%, which is 0.7 percentage points higher than the average rate on the top five easy access ISAs.

Top fixed rate ISAs

Here’s our rundown of the best fixed rate ISAs:

-United Trust Bank ISA 5 Year Bond: Pays 2.75%, transfers in only, minimum deposit £5,000

-Coventry Building Society 4 Year Fixed Rate ISA (25): Pays 2.25%, no transfers in allowed, minimum deposit £1

-State Bank of India 3 Year Online 1,000 Days Cash ISA Fixed Deposit: Pays 2.30%, transfers in allowed, minimum deposit £15,000

-Clydesdale/Yorkshire Bank 2 Year Cash ISA Fixed Rate (Issue 27): Pays 2.10%, transfers in allowed, minimum deposit £2,000

-Virgin Money 1 Year Fixed Rate Cash E-ISA Issue 114: Pays 1.65%, transfers allowed, minimum deposit £1

Check for penalties

If you’re planning on a fixed rate ISA, you can’t usually make withdrawals during the fixed-rate term without closing the account. Or, if you can, you’ll be charged a penalty in the form of loss of interest.

Even if you think you won’t need to take money out, you should still check the rules.

For example, the United Trust Bank 5 Year ISA doesn’t allow withdrawals at all during the term of the account.

Virgin, however, allows withdrawals from its one-year Fixed Rate E-ISA, but you’ll be charged 60 days’ interest when you take money out.

Best easy access ISAs

If you don’t want to tie your money up in a fixed-rate account, here are some of the best easy access ISAs currently available:

-NS&I Direct ISA: Pays 1.50%, no transfers in allowed, minimum deposit £1

-Post Office Online ISA: Pays 1.50% (including 0.85% bonus for 12 months), transfers in allowed, minimum deposit £100

-Skipton Building Society Bonus Cash ISA: Pays 1.50% (including 0.50% bonus for 12 months), no transfers in allowed, minimum deposit £1

-Tipton Building Society Premier ISA: Pays 1.45%, no transfers in allowed, minimum deposit £5,000

-Coventry Building Society Easy Access ISA: Pays 1.40%, no transfers in allowed, minimum deposit £1

Don’t delay!

If you’re planning on using some or all of this year’s ISA allowance, make sure you apply in good time.

Kevin Mountford, head of banking at MoneySuperMarket, said: “Savers must ensure that they leave enough time for their application to be processed. Those considering a postal account, for example, may find providers close their doors a few days ahead of the April 5 deadline.
 
“Remember too, that if you want to make a branch-based application, because the end of the tax year falls on Easter Sunday, all banks and building societies will be closed. For those planning to pop in on the Saturday, they need to remember that there will be shorter opening hours on that day, so they will need to check timings before leaving home.”

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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