If you are looking at opening an ISA, you can currently invest up to £11,280 in a stocks and shares ISA this tax year or split your allowance or put a maximum of £5,640 in a cash ISA.
However, with the range of cash ISAs currently on the market, not to mention the myriad of investment opportunities for anyone looking at stocks and shares ISAs, there’s a fair bit of homework that needs to be done before you decide where to put your money. You can check sites such as moneysupermarket.com to help with your research.
So, to help you on your way, we’ve come up with some top tips to help you make the most of your tax-free ISA allowance.
Save what you can, when you can
It’s unlikely that you’ll have a spare £11,280 stuffed under the mattress, but if you have, or can find, a spare £50 a month then you could use this to fund a stocks and shares ISA as, in most cases, the minimum monthly fund is £50.
If you don’t want the risk of an investment linked to the stock market, a cash ISA could be the way to go. There are a number of accounts that can be opened with just £1 investment and even just putting in £10 a month will provide the basis for a good savings pot.
Beat the bonus
It is now common practice to load easy access savings accounts with a bonus that pushes the interest rate up for the first year of investment before dropping off alarmingly in the second year. And cash ISAs are no different as the products with the most eye-catching will come with either a hefty bonus or only be guaranteed for 12 months.
Although your ISA provider should send you a reminder to notify you that the bonus period is coming to an end, you should still make a note of when this is and have a new account in place for when the time comes to transfer your savings.
Don’t let your savings stagnate
If you really want your ISA to grow then you need to make sure that you’re earning on the entire savings pot each year and not just this year’s allowance.
To do this you need to look for an ISA that has an attractive interest rate, accepts transfers in and, preferably, starts paying interest from the day your transfer is accepted; this is important as providers can take up to 15 working days before they start paying interest.
If you stick with the same ISA year-on-year then there’s a good chance that you’ll not be earning as much interest as you should be, even if your account is not heavily reliant upon a bonus.
Use the cash park
When investing in a stocks and shares ISA it’s important to make sure that you get your investment right and so you shouldn’t be hasty with any decisions.
However, if you have left it until the last minute to take out a stocks and shares ISA, then there is a good chance that could rush head long into an investment just to make the most of the time you have left in the current tax year.
To avoid doing this simply tick the ‘cash park’ option when filing your ISA application as this will buy you some extra thinking time while still taking advantage of the allowance available to you.
When you have made your decision you can then simply return to your account and make your investment.
Another thing to note if you’re making a last minute application, either over the phone or online, is that most platforms do not accept credit card payments and so you’ll need a debit card for an account with the cleared funds available. You’ll also need your National Insurance number to hand and a valid email address.