Kevin Mountford, head of banking at MoneySuperMarket said: “This year marks the 15th anniversary since the introduction of ISAs and those who have been savvy enough to take full advantage of the tax-free benefits from day one will now have a very tidy sum that is safely out of the taxman’s reach.”
How it works
ISA allowances have changed over the 15 years since the accounts became available in 1999. However, by adding up all the allowances – including the £5,760 you can shelter from tax within an ISA this tax year –
MoneySupermarket has been able to work out that a saver making the most of the tax breaks since ISAs launched could have earned a staggering £20,532 tax-free interest by now and have a total savings pot of £76,572 to play with.
By comparison, a basic 20% rate taxpayer opting for a standard easy access savings account would have earned interest of £15,670 – or £4,862 less. And a higher-rate taxpayer facing 40% tax on savings interest would have received just £11,239 in an easy access account, thereby missing out on a staggering £9,293.
But if you haven’t yet started saving into an ISA, it’s never too late said Kevin Mountford. “If you are a taxpayer and have savings, then putting your money into an ISA should really be your priority.”
It’s timely advice, as the 2013/14 tax year has less than two months to run, meaning that anyone yet to take advantage of their ISA allowance for this year only has this long to use it – or wave goodbye to it forever. That’s because ISA allowances run out when the tax year does, and cannot be rolled over from one year to the next.
Here, we look at how you can use an ISA to make your money work harder for you.
How can I make the most of my current allowance?
While the maximum cash ISA allowance for this tax year is £5,760, rising to £5,940 from April 6, you can put double that amount – so £11,520 this tax year and £11,880 next – into a stocks and shares ISA.
“Stocks and shares ISAs are another option for savers who want to make the most of their money and protect it from the taxman,” Kevin Mountford said. However, that said, there is always the risk of losing money when you start investing in the stock markets, which is why many people choose to just save half their annual allowance into a cash ISA.
Even if you already have a cash ISA fund, it is worth checking the rate against the best accounts available to ensure that you are not missing out on a better deal.
Just make sure that you choose an account that allows you to transfer in funds from another ISA provider and that you ask the account provider to arrange a transfer so that the savings you have retain their tax-free status.
Where can I find the best ISA returns?
Whether you are looking for a new home for your money, or investing for the first time, MoneySuperMarket is a great place to start your search for a cash ISA.
What’s more, now is a good time of year to be looking because it is when banks and other account providers start launching new deals to appeal to last-minute ISA investors.
The best easy access accounts on the market at the time of writing, for example, are from the Islamic Bank of Britain (IBB) and Nationwide Building Society.
The IBB account pays a higher, bonus-free rate of 1.80% on £250 and over, but requires you to wait 120 days for access to your money.
The Nationwide account, meanwhile, pays 1.47% (including a 1.00% bonus that lasts until January 31, 2015) on £1,000 and above, but gives you immediate access to your cash.
And, for some good news, both accounts accept transfers in from other ISAs.
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.