Make the most of your ISA pot
WITH the new tax year starting on April 6, time is running out to make the most of this year’s Isa pot. You can newly save up to a maximum of £20,000 into Isas in the current tax year.
Here are some tips from Laura Suter, personal finance analyst at investment platform AJ Bell:
■ Be clear what you’re saving for IF YOU know what you’re saving for, it means you’ll pick the right Isa for you. If you need the money in the next five years, you may want to keep it in a cash Isa.
But if not, you could invest in a stocks and shares Isa in the hope of higher longer-term returns (the value of investments can go down as well as up).
Are you saving for a house deposit? If so there’s a Lifetime Isa which benefit from a 25% top-up to your money from the Government.
■ Ignore the distractions THERE’S always going to be a reason to put off investing. But if you’re investing for the long-term you need to focus on what you think markets will be doing in five years or 10 years, not the next 10 minutes.
It’s notoriously tricky to buy at exactly the right time. And in the time you’re waiting for markets to rebound, or for conditions to be just right you could be missing out on returns.
■ Give yourself a 25% boost IF you are saving for your first home deposit or to top-up your retirement fund, make sure you’re not missing out on free Government cash. With the Lifetime Isa you can get up to £1,000 a year in Government bonus, up until the age of 50.
The Lifetime Isa can be opened by people aged 18-40, and you can save up to £4,000 each year. You can withdraw the money to buy your first property, or once you’re aged 60, but if you take out money for other reasons you may pay a 25% penalty.
■ Shift dividends into your Isa
IF you’ve got some of your Isa allowance left to use, and have other investments, it could be smart to move dividendproducing assets into it to avoid getting walloped with a tax bill.
■ Make income earn more income ANY dividends from investments in your Isa can be withdrawn tax-free, but if you don’t need the income now you could use them to turbo-charge your returns.
If you reinvest them you can buy more shares in the same investment, which can have a dramatic impact on the size of your Isa fund over the long term.