ISA Season...but why?

Tuesday, 5th April 2011 18:28 - by Resident IFA

The clocks have sprung forward, the nights are much lighter...a sure sign that ‘ISA Season’ is upon us. “You’re too late!” I hear you cry. Well, technically, you have a few hours left to use your ISA allowance for the 2010/2011 tax year. To re-cap, ‘ISA’ stands for Individual Savings Account. An ISA is free of Income tax and Capital gains Tax (CGT). So, if you are a basic-rate taxpayer, you avoid...  Income Tax at 20% i.e. you receive 2% interest, rather than 1.6% were it taxed as a standard savings account.  CGT at 18%. These savings are better still if you are a higher-rate taxpayer. Back to the topic in hand; human nature dictates that things are left until the last minute, but I still struggle to see quite why there is such a need for ‘ISA Season’. The investment providers even have collection venues you can drive last-minute applications to...akin to your local Parliamentary Candidate organising a car to give elderly voters a lift to the Polling Booth! ISA allowances are increasing from midnight – to £10,680 in total for the whole of the 2011/2012 tax year. Half of this can be used to fund a Cash ISA, the other half (should you so wish) an Investment/Equity ISA. Of course, you may see value in managed investment funds or equities; thus allowed to put the whole £10,680 into that type of ISA. Remember, you can have a different provider in a tax year for your Cash and Investment ISAs, yet not more than one provider for each constituent part i.e. only one Cash ISA provider in any given tax year. My advice, for what it’s worth, is to try to plan ahead a little between now and next April. If you have the monies readily available to make a full or partial contribution from midnight tonight...then why not make it sooner rather than later? Happy hunting! Until next time...