Why pay more tax than you need to? It’s that time of year again when we encourage you to make sure you are taking advantage of your ISA limits before it’s too late.

It’s important to remember that each year you get a new ISA allowance, which rises year-on-year within inflation, so how can you ensure that you don’t miss out?

ISAs in brief

Individual Savings Accounts (ISA) are tax free savings accounts, which means that, unlike a regular bank or building society account, savers do not need to pay the government any tax on any return you receive from your investment. This means that they’re normally a better place to put your money than any other account, as without a tax deduction at the end, it means there is a chance your returns may well be higher.

There are two types of ISA: Cash ISAs and Stocks and Shares ISAs. Cash ISAs simply operate as a normal savings account: you can get your money back at any time and they’re suitable as a short term investment or savings measure. Alternatively, certain stocks and shares can be converted into a Stocks and Shares ISA. This is normally a longer term investment and, as with any investment involving stocks and shares, your investment may go down in value as well as up: there are no guarantees that you will make a profit.

ISA limits

Each tax year, the government sets a limit on the amount of money you can invest in ISAs. The limit is firstly defined as an overall limit but then a second limit is placed on how much you can put into a Cash ISA. For the tax year ending 5th April 2014, the overall limit is £11,520, whilst the maximum amount of this you can invest in a Cash ISA is £5,760. There is no limit to how much you can put in a Stocks and Shares ISA, subject to your overall ISA investment staying at or below the £11,520 total limit.

Time to act!

The 5th April deadline is fast approaching and, every year, plenty of savers miss out on this fantastic opportunity to put money away and enjoy any returns without having to give the tax man a slice!

As always, our recommendation is very much to talk to your adviser about any investment you are considering, but whatever your financial advice arrangements, it’s prudent to take a close look at ISAs and make an investment before your 2013/2014 ISA allowance comes to an end in April.

Sources: http://www.hmrc.gov.uk/