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How an ISA works
Unless you’re an accountant, or the Chancellor of the Exchequer, the start of the new tax year probably isn’t ringed on the calendar on your kitchen wall.
But perhaps it should be. April 6 is a key date for all of us, and when it comes to saving, being prepared will help you make the most of every penny you can put away.
ISA allowances are based on the tax year, rather than from January to December, and taking the time to prepare will help you take full advantage of ISA saving.
A great way to save well
Saving is a great habit to get into, and ISAs help you maximise the benefits by keeping any gains free from tax.
Even if you don’t have much to spare, saving little and often helps make saving a habit, and monthly payments into an ISA will soon start to add up.
Click here to find out more, so you’re armed with the knowledge you need to make a confident decision about how to make an ISA work best for you.
How to have a happy new (tax) year every year
There are two very good reasons to get yourself ISA-ready in plenty of time.
Firstly, to make sure you make the best use of your allowance.
ISAs let you save money without paying tax on interest or any investment returns but there are strict limits on how much you can save. For the 2021 to 2022 tax year, adults can put up to £20,000 in to ISAs. This allowance is unchanged from 2020 to 2021.
If you won’t get close to the limit, that may not matter to you, but if you are able to save the full allowance, make sure you have used it before the end of the tax year on April 5.
And secondly, if you have done your research in advance, you will have time to open the very best ISA for you on April 6, so your money will be working for you from day one.
You can only take out one cash ISA and one stocks and shares ISA each year, so making the right choice is crucial.
And once you’ve done it, make a note in your diary for next year, so it becomes tradition, just like singing Auld Lang Syne.
Your action plan
- Budget - make the most of your allowance and max out your savings every year
- Research - make sure you take out the ISA that works best for you
- Plan - put a note in your diary for next year so this becomes an annual habit
Tax treatment depends on your individual circumstances and may change.
This is not intended to give financial advice or a personal recommendation. If you need a personalised recommendation based on your personal circumstances, you should seek the advice of your financial adviser.
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