The end of the tax year is nearly here, so now could be a good time to make sure you've maximised your 2015/16 ISA allowance of £15,240.
Before you decide how to use your ISA allowance, you'll first need to decide where you'd like to put your money. It's up to you whether you:
- Take out a Cash ISA
- Subscribe to a Stocks & Shares ISA
- Or share your allowance between both
If you are looking to start saving and want instant access to your money, then a Cash ISA could be the right choice. They work like normal saving accounts except the interest isn't taxed, so all the interest you earn is yours to keep.
Help to Buy: ISA
Saving up for a deposit for your first home?
Open a Help to Buy: ISA and the UK Government will reward you with an additional 25% of the amount you save, up to a maximum of £3,000.
Save up to £200 per calendar month. Interest is tax-free. You can save an additional £1,000 in the first month to help get you started.
Could a Stocks & Shares ISA be a better option for you?
Stocks & Shares ISAs could offer higher returns. So if you're prepared to take a certain level of risk, now could be a good time to take the plunge. We have a range of ISAs for you to choose from. You can choose Stocks & Shares ISA products dependent on how you wish to invest:
|• World Selection ISA – a ready-made portfolio, managed by a team of qualified investment professionals, at your chosen level of risk|
|• Global Investment Centre – you can build your own portfolio of funds|
|• InvestDirect/InvestDirect Plus – you can build your own portfolio of securities|
If you subscribe to a Cash ISA, you will not be able to subscribe to a Help to Buy ISA in the same tax year. However, there is a way round this. Five providers allow ‘split ISAs’ – here they manipulate the rules to put the Help to Buy ISA and a cash ISA together in the same wrapper, effectively allowing you to have both. Remember, your maximum ISA allowance per tax year is £15,240 so your combined ISA savings (the amount you put into an ISA) can't exceed this.
The only negative for doing this is you may get lower rates on both your Help to Buy ISA and cash ISA by linking them together. If this isn’t for you it’s worth remembering while a cash ISA lets you save more, getting a Help to Buy ISA still beats it as the 25% state-added bonus is far bigger.
If you choose a Stocks & Shares ISA you'll need to bear in mind that the value of your investments (and any income received) can fall as well as rise, and you may not get back the same amount you invested. For some investments this can also happen as a result of exchange rate fluctuations, as shares and funds may have an exposure to overseas markets.
Investing should be seen as a medium to long-term commitment, for example at least 5 years.
The value of any tax benefits described depends on your individual circumstances. Tax rules may change in future.