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Use up this year's ISA allowance By Jeff Salway
Industry research has found that we waste a whopping £382 million in tax each year by not putting our money in ISAs, so act quickly to shelter your savings from the Inland Revenue. The basics Each year anyone over the age of 18 can invest up to £7,000 in ISAs - either £3,000 in a cash ISA and £4,000 in a stocks and shares ISA or the full £7,000 in stocks and shares. All growth on your investments is tax-free, rather than being taxed at your marginal rate (22% or 40% for higher-rate taxpayers) as with other saving and investment vehicles. Why the rush? The 2006/2007 tax year ends on 6th April, which means that if you haven't already invested this year's allowance, you will miss the opportunity to build tax-free savings. If you're yet to invest this year, do so quickly - most banks are accepting ISA applications until the end of Thursday 5 April and most online discount brokers and fund-supermarkets will accept applications until midnight. Where to invest If you don't already have an ISA it's generally advised to start with a cash ISA, so if you have money in other (non-ISA) savings accounts transfer it as soon as possible. Cash ISAs generally pay around 5%. If you want to take a little more risk for greater growth potential, most equity funds are available in an ISA wrapper. Next year's allowance From 6 April, you have another £7,000 tax-free allowance to use. It doesn't have to be deposited in a lump sum at the end of the tax year - instead, you can begin making smaller regular monthly contributions throughout the year to utilise your allowance and maximise growth. The average UK equity fund would have turned £7,000 into £7,493 after charges over 12 months.
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