The start of the new tax year is a mere week away, but fear not – there's still time to make the most of your tax-free allowance! If you haven't yet made your subscription for the 2014/15 tax year it's about time you did, and you've still got a few days to make your deposit into that all-important ISA. After all, if you don't use it, you'll lose it…
The last-minute rush
If it's one of those things that you've left until the last minute, you're not alone. Research from Fidelity Personal Investing has revealed that the most popular day for ISA investing during the end of tax year period is 2 April, just three days before the end of the tax year. This date saw the largest amount of new investments made into an ISA during the year-end periods of 2012, 2013 and 2014, and by all accounts, this year will be no exception.
"Shoppers have Black Friday and it looks like investors have 'ISA Black Thursday'," said Maike Currie of Fidelity Personal Investing, "with considerably larger amounts of money being invested on one specific day compared to the others. This year 2 April falls on the last working day before the Easter bank holidays, and investors need to be careful not to miss out using their ISA tax allowance – once the new tax year kicks in the opportunity will have passed".
Don't miss out!
Missing out on tax-free savings just doesn't make sense, and if you've got the money ready to go, why not put it in an ISA before the year runs out? Don't think about saving it for next year, either – if you don't utilise your allowance each year it re-sets, so if you max out your ISA limit on 6 April with money you could have invested this year, you've effectively wasted a year's worth of saving, because you won't be able to invest any more at a later date.
Alternatively, if you put the cash in an ISA now, you'll still have your complete 2015/16 allowance (an impressive £15,240) which you can add to at your leisure throughout the tax year. You'll be earning interest on the money you saved in the 2014/15 tax year and will have the chance to earn even more next year, offering you a greater potential to secure decent returns.
"The reason getting in early makes such sense is the magical power of compounding, which magnifies the returns on your money by building new investment returns on those you've already achieved," added Maike Currie. "Time really is the most powerful force in investment, [and] these days adding to your ISA could hardly be simpler. Online or on the phone, it's just a few minutes work. It's a great deal easier than thinking of reasons not to do it."
How much of a difference will it really make?
It just makes sense! It could make a lot of difference, too. If you invested £15,000 in the top-paying ISA right now – Virgin Money's five-year ISA paying 2.35% – and added the full 2015/16 allowance of £15,240 on Tuesday 7 April, you'd earn £710.64 in interest by 7 April 2016. If you waited until the new tax year and just paid in the £15,240, you'd only earn £358.14 over the same period, and wouldn't be able to add any more that year.
Of course, this is only based on this particular account – Virgin's five-year account conveniently permits further additions for up to 30 days after the account is opened, something that not all fixed rate ISAs allow. You may have to invest in separate accounts, but the principle is the same – invest in both tax years and you'll achieve far more in interest and won't have sacrificed a year's worth of tax-free benefits.
There's still time…
So, what are you waiting for? You've still got a few days before the window of opportunity closes, so check out the top ISAs available to see if you can make your money work harder. But, make sure to check how long it'll take for the deposit to be received by the provider – some accounts will accept fast payments if you're arranging things online, while others will credit your account there and then if you make the payment in-branch.
However, for others, it could take several working days for the payment to be credited to the account, and if that's the case you could be cutting it a bit fine. But, there's no harm in trying, and if it doesn't make it in time for this tax year, at least you've given next year's ISA savings a decent head start. Take a look at the best buys, and see if you can make the most of this year's allowance…
Money Matters: 30th Mar 2015 09:39:00
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