Three ways to be ISA wiser before the tax year ends

We’ve reached the mid-way point in the tax year, which means this could be the perfect time to start thinking about all things ISA.

To recap, an Individual Savings Account (ISA) is a way for you to save and not get taxed on what you put away. It’s a pretty compelling proposition, and the limit for how much you can put away per tax year is currently £20,000.

As April will be upon us in two shakes of a feather, we’ve outlined the top three things you can do to make sure you’re maximising this tax-free opportunity.

1. Use up owl of your ISA allowance.

If you can, make sure you either top up or open an ISA so you use up your full £20,000 annual limit. Once May rolls around, you won’t be able to add any more into these pots for the 2024/25 tax year. If you’ve got an Easy Access ISA, you can usually deposit funds up to the current year's ISA subscription limit. And if you have a Fixed Rate ISA, you can always open a different type of ISA to get the most out of the interest, as long as your total ISA savings don’t exceed £20,000.

2. Swoop in on the highest ISA rate.

As interest rates have increased over the last year, your Cash ISA may not have the best rate anymore and other providers could well be offering something higher. Depending on your account, you may be able to transfer the money you’ve put away into a different ISA and benefit from more tax-free interest. However, it’s very important that you check the terms of your existing account before arranging a transfer, as there may be notice periods or charges that apply.

3. Create a nest egg with your Cash ISA.

The money in your Cash ISA will always earn tax-free interest. But as soon as you withdraw money, you can’t add it back in without it counting towards your ISA allowance for that tax year. And don’t forget, if you choose to keep any interest you’ve earned in your Cash ISA, you’ll earn interest on that interest too!

It’s also important to consider the new changes that came into effect for the 24/25 tax year. The only mandatory change is the age limit for an adult ISA, which is now 18+. Anyone younger will need to open a Junior ISA.

The optional changes won’t need to be taken up by providers, but it’s good to know what they are so you can make informed decisions. For example, you’re now able to have more than one type of ISA in the same tax year, whereas in the past, you were only allowed to have one ISA of a particular kind (a Cash ISA, for example).

In addition to this, you’re now able to branch out and have multiple ISAs across different providers. This means you’ve more flexibility with how you save and who you save with throughout the tax year.

If you have any questions or want any more information, check our ISA Hub or get in touch.