Moneywise readers swoop on last-minute ISAs
The savvy intentions of our readers mean they will benefit from tax-free savings on the full 2012/13 tax year allowance of £11,280, half of which can be invested in a cash ISA.
On top of the 52% of readers who said they will invest the full amount before the new tax year starts on Saturday, 22% said they would invest part of the allowance.
Another 21% said they would not be investing as they do not have any spare cash lying around, while only 4% said they do not know how to use their ISA allowance.
Despite the promise of tax-free savings, some savers are less than enamored with some of the rates currently offered by providers.
Don't give money to the taxman
One reader, Hesperus, said: "I have to admit to feeling something of a fool for bothering to save these days.
"Interest rates are so low and after the Cyprus disaster I now feel as if my hard-saved money is vulnerable."
But Kevin Mountford, head of banking at MoneySupermarkert, said: "You'd be throwing money away to the taxman if you didn't take advantage."
He added: "A number of providers have announced new rates in the last few weeks, and finally we're seeing more competitive rates emerge.
"Due to falling savings rates, we are now beginning to see more people opting for fixed-rate ISAs over easy-access cash ISAs. While the rates on these products are more generous, savers need to be prepared to lock the money away as they cannot access it during the term of the bond.
"For those who cannot afford to lock money away, you can still get rates five times that of base rate on easy-access cash ISAs."
He said it is worth planning ahead for the next tax year as well – when the allowance increases to £11,520.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.