ISA allowance
Get saving with an ISA
With all the doom and gloom stories littering the press warning of
the country’s escalating personal debt crisis youd be forgiven for
concluding that Britain is in a far worse state that it probably
really is. Sure, debt is an issue that we’d be foolish to ignore;
there is a buy now pay later culture in the UK these days that’s
leading far too many of us into financial crises that will likely
prove hard to escape from.
There is an upside however that gives the lie to the popular
judgment that we Brits are turning into financial irresponsible
consumers intent on living beyond our means; in fact, as a recent
report by Alliance and Leicester Savings indicates, there is an
encouraging trend towards saving money in the UK right now.
Indeed, the country is apparently close to saving £1trillion, a
figure that isn’t far behind our collective personal debt of
£1.36trillion. Things start to look even healthier when you
consider that 85% of this debt is in mortgages. Maybe we Brits aren’
t quite so financially irresponsible after all.
So, if you aren’t already part of this savings wave perhaps now is
the time to start squirreling something away for the future.
The difficulty for many is not knowing the best place to stash
their cash; there is such an array of possibilities that one could
easily worry about choosing the wrong option. ISAs however are a
pretty safe place to start.
The big draw with ISAs, as you may already be aware, is that they
are tax free. Set up by the government in 1999 to encourage more
people to save, ISAs (or Individual Savings Accounts) have proved
to be a popular means of saving and it’s little wonder really;
because they protect your savings and investments from the tax man
you’ll be hard pressed to find a conventional savings account that
offers such competitive interest rates.
The only draw back with ISAs is that you are limited to a maximum
investment each year, at the moment this limit stands at £7000,
£3000 of which can be in cash savings. These limits will change in
April however, with the overall allowance set to go up to £7200 and
the maximum cash amount going up to £3600. An ISA can take the form
of either a stocks and shares investment or cash savings. The more
straightforward option for savers is a Cash ISA which operates in
much the same fashion as a normal savings account and thus has
hardly any attached risk.
As things stand right now you’ve got a choice between Mini and Maxi
ISAs; the Maxi option is more likely to suit investors in stock and
shares because they are typically offered by Investment companies
who tend not to offer the most competitive cash savings rates, if
you’re keen on the idea of investing rather than simply taking
advantage of a tax free savings account then the best option is
probably to get a Maxi ISA and put your full £7000 allocation into
stocks and shares.
For the majority who are interested in getting an ISA as an
alternative to a savings account a Mini ISA is probably the way to
go; you can have two mini ISAs, up to £3000 in cash and, if you
like, the rest in a separate stocks and shares. This means you can
look for the best Cash Mini ISA (there are some pretty good deals
out there an A&L Direct ISA
offers 6.25% gross p.a. variable compared to 6.50% from their
eSAver savings
account, the ISA of course won’t be taxed, making it a better
overall savings prospect).
If you do fancy getting an ISA now’s the time to do it; with
just over a month left before the end of the tax year you’re
running out of time to take advantage of this years
allowance!