You have until the 5th April to use or lose your ISA (Individual Savings Account) allowance for the current tax year… you’ve probably heard this already …but if you don’t know what an ISA is and why it’s valuable then this article is for you.
What is an ISA anyway?
ISA or Individual Savings Account to give it the long name is a designation given to an account that means that is more tax efficient than standard savings or investment accounts. In most other ways it is identical to an ordinary savings or investment account, though there are a few rules you have to stick to in order to keep the tax breaks.
There are currently 5 types of ISA that can be opened and 1 that you might still have but can’t open anymore.
You can still open;
- Cash ISA
- Investment ISA (Stocks & Shares ISA)
- Lifetime ISA
- Innovative Finance ISA
- Junior ISA
And you might still have;
What are the ISA Allowances for this tax year?
For 2021/22 tax year Cash ISAs, Investment ISAs, Lifetime ISAs and Innovative Finance ISAs have a contribution limit of £20,000 and if you don’t use it up before the end of the tax year then it is gone, though you do get a new allowance next year. Junior ISAs have an allowance of £9,000. Help to Buy ISAs if you already have one can accept up to £200 per month.
What is so special about an ISA?
Any income or growth in an ISA is exempt from both capital gains tax and income tax. Because of this they are an excellent vehicle (pensions are better but less flexible) for tax efficiently building savings and investments for the future.