Today, April 6, is not just the first working day after the Easter holiday. It is the first day of the 2021-2 tax year. This blog, briefly, is about individual savings accounts, otherwise known as ISAs. I’m not going to get in too deep here (I had an unsolicited email the other day from a company affiliated with an organisation called isafinder.com which warned that “UK residents wishing to participate in this promotion must fall into the category of sophisticated investor or high net-worth individual as outlined by the Financial Conduct Authority”, so I knew I was well out of my depth without reading any further), but since this is the first day of a new tax year it means you have the maximum amount of time to figure out if an ISA is the answer for you.
I realise that might depend on what the question is, but for sure we would all like to maximise our acquaintance with items such as the purple-and white-ones shown below.
What’s the point of an ISA? To protect your money from HM Revenue & Customs. Basically, there are two main types: a Cash ISA and a Share ISA. Whichever version you might opt for, it is not an investment of itself. It is a savings vehicle which means you do not have to pay tax on it irrespective of how much money you have. You can pay into your ISA a maximum of £20,000 per year. It cannot be rolled over, so if you put in £15,000 in the last tax year, which ended yesterday, you cannot top it up to £25,000 for this year.
Financial advisers – which most definitely do not include me – expect ISAs to be especially popular in this new tax year. Many people have effectively been unable to spend their money over the past 12 months, with bars and restaurants being closed for much of the period and foreign holidays being much reduced; in fact, right now illegal until at least May 17. The appeal of enhancing your savings in a more creative manner, earning a better rate of interest, rather than leaving your money to sit idle in a current account seems obvious. It may be something you want to look into…with the assistance of someone who knows what they are talking about!