Use it or lose it time for your ISA

As the end of the financial year draws ever closer, it’s important not to forget about any ISAs (Individual Savings Accounts) you have and any remaining payments that you’re allowed to make. The maximum allowance for ISAs for the 2015/16 financial year is £15,240, so it’s important that you invest any funds that you have left to pay into your ISA as close to that amount as possible, as soon as you can.

The amount will reset again on 6th April 2016 whether you have paid in the maximum amount or not – it cannot be carried over to the next year – so make sure you take advantage of your full allowance whilst you can.

If you’re still not completely up to speed on ISAs, there are essentially two different types available: cash ISAs and stocks and shares ISAs. You are entitled to open one of each ISA in any financial year. If you have just one ISA, then £15,240 is the maximum amount you can pay into that account over the financial year.

Until a couple of years ago when the ISA system was overhauled, if you opened two ISAs in one year, that maximum investment amount had to be split in a prescribed way between your two accounts. However, since the system was overhauled in 2014, if you open both types of ISA in one year then the amount can be split between the two accounts however you wish. For example, if you were to invest £10,000 into your cash ISA in one financial year, you could then invest a maximum of £5,240 into your stocks and shares ISA that year. You can even choose to invest the full amount into a stocks and shares ISA should you wish, which you couldn’t do under the old system.

The main draw of investing your money into an ISA is, of course, that any money you pay in is exempt from taxation on withdrawal, allowing you to potentially build up interest on invested funds much more readily than in other forms of savings or investments. It’s typically considered a good idea, therefore, to take full advantage of any ISAs you have before 5th April this year, if you are in a position to do so, or you will be missing out on the tax-free savings you’re entitled to.