Here's our last minute guide to all things ISA
Total allowance for adults £20,000 this can be distributed across cash, stocks and shares and innovative finance ISAs.
ISAs are tax free savings accounts, this means you pay no income or Capital Gains Tax on the money invested. Each year you have an allowance which allows a contribution of this much per year (the amount you contribute is the same, regardless of whether or not you make any withdrawals).
Cash ISAs
- Includes Help2Buy and some lifetime ISAs
- Money is held as cash in an account like a usual savings account
- Can come in easy access or tied-up (fixed) accounts.
- Various interest rates but all are quite low at the moment.
At this stage we would not encourage you to open a Help 2 Buy because it is based on regular monthly contributions and so you can't put in a last minute bulk of money.
Why choose a Lifetime ISA?
Lifetime ISAs are good for those who:
- Don't necessarily want to save on a regular basis
- Want to save more than £200 per month (or £2400 per year)
- Willing to save £4000 or less in the ISA
- Haven't contributed to another cash Isa this tax year
- Are looking to save for a house (N.B they can be used for a retirement but we'll share in another post why this is a BAD idea).
- looking to buy a house anywhere in the UK up to £450,000
- are a first time buyer
- want to take advantage of some awesome government bonus
In fact we wrote a whole post about whether or not a Lifetime ISA is for you.
For those looking to buy in the next 5 years or so a cash version is buy far the best option due to the fact that investment in stocks and shares should always form part of the long-term investment aspect of your portfolio.
Currently Skipton are the only provider offering the cash version and it seems exceptionally unlikely that any of the big banks are going to open in time for the end of the tax year. It is offered with a 0.75% interest rate. Whilst considerably less than the Help-2-buy ISA is worth it due to the increased potential bonus (in our opinion). As always the Skipton ISA is covered by the FSCS scheme which means your money is protected in the case the bank goes into liquidation (this is not the case for the stocks and shares lifetime ISA and thus your capital is always at risk).
We have tested out the Skipton account for ourselves and have been really impressed by the quality of customer service. The only downside we have found is the potential for branches to be quite sparse depending on where you live (here in Brighton our nearest branch is almost an hour away). However, you should be able most of the banking online.
Best Cash ISA Rates
- Best fixed ISA - Paragon 5 years 1.9%
- Best "easy access" ISA- Nationwide 1.4% (but only allowed one withdrawal a year)
- Best easy access ISA- Virgin 1.16%
Junior ISA
These replace the old style child-trust funds and allow for tax free savings of up to £4128 per year per child. You might think "but my child doesn't earn enough to pay tax" and you'd probably be right but when your child turns 18 any money in the junior ISA gets transferred into an adult ISA. This means if you saved at the current allowance at the best rate available (see below) your child at age 18 could have over £100,000 in savings !!
Currently Coventry Building Society has the best rate at 3.5% interest for a cash ISA (junior ISAs can also be stocks and shares).
Stocks and Shares/ Innovative finance ISAs
- These ISAs have the potential for much greater returns that the current low rates available for cash ISAs.
- However, they are also associated with much higher levels of risk.
- Making an last-minute rushed investment decision is not a good idea and we would therefore no recommend at this stage of the tax year opening up one of these ISAs
- You are much better off putting the money in an easy-access cash ISA and transferring it at a later date once you are clear what your risk appetite and investment goals are.
Our biggest tip is don't delay, all financial providers are very busy at the moment and things make take longer than usual.
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