ISA deadline warning: Allowances will reset tomorrow – utilise your tax incentives today | Personal Finance | Finance
ISA accounts can have up to £20,000 saved into them per tax year and all the money saved into these accounts will be sheltered from tax. However, these tax incentives can only be utilised within the tax year which ends today.
Up to £20,000 can be split among the four main types of ISA, the cash, stocks and shares, innovative finance and Lifetime ISAs.
However, the £20,000 limit will reset from tomorrow and any unused allowances will be lost from today if they’re not utilised.
Today is also the last day a person can open and contribute to an ISA for the 2020/21 tax year.
ISAs can be opened with any of the following institutions:
- Building societies
- Credit unions
- Friendly societies
- Peer-to-peer lending service
- Crowdfunding companies
- Other financial institutions
READ MORE: Money Talk: Should you be switching between savings deals?
The Bank of England recently kept the base rate at 0.1 percent and as a result, savers are losing out as their cash is growing at a slower rate than inflation, creating negative real returns.
This low base rate has, according to Salisbury House Wealth, suppressed interest rates offered by providers, meaning savers will struggle to find competitive interest rates even when shopping around.
Salisbury House Wealth detailed: “The lowest cash ISA interest rates are offered by instant access accounts at an average of just 0.25 percent, down from 1.08 percent last year.
“While 5-year fixed rate cash ISAs offer the best interest rates at an average of 0.83 percent, down from 1.60 percent last year.”
Despite the dire analysis, some deals can still be found by those willing to look.
On April 1, moneyfacts.co.uk released their “pick of the week” for the best savings and mortgage products available for customers.
Two ISAs were highlighted for having the best returns for customers, with the first being the West Brom Building Society – two Year Fixed Rate ISA.
Eleanor Williams, a Finance Expert at moneyfacts.co.uk, reviewed this account: “West Brom Building Society has launched a number of savings products this week, including a new two-year fixed rate ISA. Paying 0.55 percent yearly, this account secures a position in our top rate tables when compared to other ISAs currently on offer with similar terms.
“Both early access and transfers out are permitted, subject to either providing 90-days’ notice or a 90-day loss of interest penalty, which – with careful planning – may be a benefit for some investors.
“This could be an attractive option for those able to meet the minimum investment amount of £1,000 and who are happy to secure their funds away for the term.”
Additionally, the Tipton & Coseley Building Society – Fixed Rate ISA also offers decent returns, as Eleanor concluded: “This week Tipton & Coseley Building Society has made various amendments to its range of savings products, including the launch of a new one-year fixed rate ISA. Paying 0.45 percent yearly the account secures a position in our top rate tables when compared against other ISAs with similar terms currently on offer in the market, and therefore may be an attractive option for those who are looking to use their tax-free ISA allowance before the tax year ends next week.
“Savers may also be pleased to note that earlier access is permitted, subject to a loss of interest penalty, so careful planning may be advised.”