Don’t let your £15,000 NISA go to waste

You can now stash even more of your cash into an ISA, so don’t miss out on the opportunity to boost your tax-free returns.

The amount you can save into a cash New ISA (NISA) has almost trebled since July 1, so you can invest up to £15,000 and pay no tax on your earnings.

Here we look at all the options, from topping up an existing ISA, to switching to a better deal, or paying into an ISA for the first time.

Topping up your current ISA

If you opened a cash ISA at the start of the new 2014/15 tax year on April 6, then up until July 1, you’d only have been able to pay in a maximum of £5,940. Since July 1, you can now top this up to the new £15,000 NISA limit.

A word of warning though: if you’ve opened a fixed-rate ISA, you’ll probably only have a limited window of opportunity to pay the maximum into your account. That’s because fixed rate ISAs can usually only be opened with a lump sum, with no additional deposits permitted.

Most providers however, are allowing savers to top up their fixed rate accounts, but only for a few weeks.

Anyone who has a fixed rate ISA with either Coventry Building Society, or Tesco or Santander, for example, has until July 31 to pay in up to £15,000. After this date, however, you won’t be able to make any more top ups.

TSB, however, allows top ups into its fixed rate ISA until April 5 next year, while if you opened a fixed rate ISA with Halifax between March 11 and June 30, you have 180 days from the date you opened the account to top it up.

If you opened a fixed rate ISA with Halifax after July 1, then you’ve got 60 days to make top ups.

Les Roberts' article Can I top up my fixed rate ISA? has a full list of providers and their rules and deadlines

Moving to a better deal

The new higher £15,000 limit has prompted many providers to improve some of the ISAs they offer in a bid to lure savers in. That means if you’ve already got savings in existing cash ISAs, you should review how much interest you’re earning and transfer your money to a new account if you can find better returns elsewhere.

DON’T, whatever you do, cash in your money to transfer it across, otherwise it will lose its tax-free status. Instead you’ll need to request and complete a transfer form from your new provider who will then arrange to move the money across on your behalf.

Bear in mind that not all ISA providers accept transfers, so you won’t have your pick of every account. Those that do accept transfers include BM Savings market-leading ISA Extra (Issue 11), which pays a variable annual equivalent rate (AER) of 1.55% on a minimum investment of £1, and Halifax’s ISA Saver Online account which pays 1.50% AER variable, again on a minimum investment of £1.
 
Be aware, however, that both these accounts include short-term bonuses in the rate. The BM Savings account has a fixed bonus of 1.05% for 12 months, while the Halifax account has a 1.25% bonus for 12 months.

That means after a year, rates on these accounts will drop to 0.50% and 0.25% respectively, so if you do transfer into either of these accounts, you’ll need to transfer your money again as soon as the bonus disappears.

First-time ISAs

If you’ve never saved into a cash ISA before, you should grab the opportunity to earn tax-free returns as soon as possible.

The aforementioned Halifax and BM Savings ISAs are both well worth a look for first-time ISA investors, particularly as both can be opened with as little as £1, but there are several other ISAs available which also pay decent returns.

Nationwide Building Society’s Instant ISA Saver account, for example, pays 1.50% AER and there’s no short-term bonus included in the rate. Don’t let your balance drop below £1,000, though, or your interest will plummet to just 0.25% AER.

If you’re keen to lock into a fixed rate ISA, where you have peace of mind the rate won’t change during the term of the account, Halifax is paying 1.55% if you tie up your savings for a year in its 1 Year ISA Saver Fixed account.

You must pay in at least £500 to open this account. You won’t be able to dip into your savings though, as no withdrawals are allowed. You can close the account early if you need to, but you’ll lose 90 days’ tax-free interest.

Longer term fixes

If you’re happy to tie up your cash for a bit longer, then the AA’s 2-Year Fixed-Rate ISA pays 2% AER on a minimum investment of £1. Withdrawals are allowed, but you’ll lose 180 days’ interest if you take out any cash in the first year, and 90 days’ interest if you make a withdrawal in the second year.

Whichever ISA you go for, don’t miss out on the chance to earn tax-free returns. Kevin Mountford, head of banking at MoneySuperMarket.com said: “While the £15,000 maximum investment limit may be beyond many savers, it still makes sense to save something into a NISA account due to the tax-free benefits.

“Even saving a small amount lodged into an NISA can make a difference in the long run.”

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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