Savers have until midnight on Tuesday 5 April to use their 2015-16 Isa allowance – or lose it.
The tax year draws to a close in just four days so if you haven’t yet found a home for this year’s £15,240 allowance, now is the time to take action.
You can deposit the full allowance into a cash Isa, a stocks and shares Isa, or a mix of both. If you’re a parent, you can also put up to £4,080 into a junior Isa for children under the age of 18.
How to find a great cash Isa deal
The Which? Money Compare Isa tables let you search hundreds of Isas from providers large and small to find a great savings rate based on quality of service as well as cost and benefits.
It can take a matter of minutes to open a cash Isa online – make sure you have your National Insurance number to hand and your addresses for the last three years.
The deadline for submitting an Isa application depends on the provider.
New Santander accounts, for example, must be opened online by 9pm on 5 April 2016, while Virgin Money has given a cut-off time of 8pm on the same day. Halifax, Bank of Scotland and Lloyds Bank Isas can be opened online right up until midnight.
If you prefer to apply in person, check your bank’s branch opening hours and remember to bring the necessary forms of identification with you.
Reasons to use your Isa allowance
The new personal savings allowance being introduced on 6 April 2016 has prompted many savers to question the value of Isas going forward.
Basic-rate (20%) taxpayers will be able to earn £1,000 interest from savings tax-free, while higher-rate (40%) taxpayers will be entitled to a £500 allowance. Additional-rate (45%) taxpayers get nothing.
However, this new tax break doesn’t mean you should ditch Isas. We think there are still clear advantages to making the most of your Isa allowance:
- Isas future-proof your savings against tax – this is important protection for when interest rates start to rise, particularly if you are a higher-rate taxpayer, or if you are likely to become one in later life.
- Cash Isas can offer the best rates – when it comes to instant-access accounts, Isas consistently beat normal savings accounts.
- Couples can inherit each other’s Isa allowance – under rules in place since April 2015, partners can pass on Isa savings without losing the tax-free benefits. We explain the rules in our inheritance Isa guide.
Find out more: Isas vs savings accounts – our detailed analysis explains which is best for you
Important changes to Isa rules and limits
There are number of changes being made to Isas from 6 April 2016 and beyond. Here are the key points to be aware of:
Isas are becoming more flexible from 6 April 2016
You will soon be allowed to take money out of your Isa and replace it, without using up any of your tax-free annual allowance – as long as you do so in the same tax year.
However, Isa providers do not have to offer this flexibility (and indeed Santander has already stated that it will NOT offer this flexibility on its Isa range) so you must check with your provider first.
New innovative finance Isa launches on 6 April 2016
If you lend money via peer-to-peer (P2P) platforms such as Zopa and Ratesetter, you will soon be able to use the new innovative finance Isa to avoid paying tax on any interest earned.
This product officially becomes available on 6 April 2016, but not all of the major peer-to-peer lenders may launch it on this date.
Find out more: innovative finance Isa – what we know so far
Lifetime Isa introduced on 6 April 2017
From 6 April 2017, savers under the age of 40 can open a lifetime Isa to save up for a house or for retirement.
The government will add a £1 bonus for every £4 saved in these Isas, although there are many terms attached.
Find out more: lifetime Isa – get to grips with the terms and conditions of this product
Your Isa allowance will increase to £20,000 on 6 April 2017
Your Isa allowance will remain at £15,240 in the 2016-17 tax year, but will rise to £20,000 in the 2017-2018 tax year.
- Have your savings questions answered by calling the Which? Money Helpline
- Read our comprehensive, expert guide to how to transfer your cash Isa
- Get to grips with the latest changes in this guide to Isa rules and limits
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.