Isa Allowance Countdown Use It Or Lose It

By Alison Steed

There are only a few working days left to use up your individual savings account (Isa) allowance this year, and with up to 1.5m savers set to lose out, you should take advantage of this valuable tax break before it is too late.

This estimate is from research from Clydesdale Bank and Yorkshire Bank based on how many savers could miss out if they leave things until the last minute.

The over 50s will lose out on more than the rest of us this year if they fail to make the most of the Government’s largesse, as they can deposit up to £10,200 into a mix of cash Isas and investment Isas this tax year, increasing returns by as much as 28 per cent thanks to no tax being applied to gains.

By putting this maximum amount into an investment Isa each year until they reached 65, with a return of 6.5 per cent a year before charges, the fund could have grown to a whopping £312,447 by the time they reach retirement age. This means £160,000 in investment returns would have been out of the clutches of the taxman.

Tom Stevenson, investment director at Fidelity International, says, "If you are aged over 50, you still have the opportunity to contribute £10,200 before the end of this tax year. The simple fact is that, if you don't use this allowance and choose to leave your investments or savings outside an Isa, you're agreeing to give part of your investment return to the Government. As you can see from our figures, that could amount to throwing away a huge amount of money over the years. An Isa puts all the money back into your pocket and your pocket alone."

For the rest of us, the limit is £7,200 until April 5, but this will rise to £10,200 from April 6. But you cannot carry over any of your Isa limit to the next tax year, so use it now before you miss out.

You can put £3,600 – or £5,100 if you are over 50 – into a cash Isa before April 5, and the same amount into an investment Isa before the end of the tax year.

If you have already used up your allowance, you will have to wait until April 6 for your next Isa allowance to kick in. But you should use this sooner rather than later in the next tax year to get more benefit from tax efficient savings.