9 March 2015
Top-up or lose out
Kate Murray, Lead Savings Products Manager at Principality Building Society, outlines the importance of getting to grips with your ISA before the tax year is out.
ISAs. We hear a lot about them, particularly at this time of year, but do you have the knowledge you need to be able to maximise their benefits before the tax year is out? As we enter what’s known as ISA season in the industry - where many banks and building societies launch their latest selection of tax-free savings accounts - now is an apt time to make sure you’re armed with the know-how to get the most from your savings products.
Individual Savings Accounts, so called ISAs, are essentially a wrapper that can hold a range of investments, cash and stocks and shares free from income tax and capital gains tax. They were introduced in 1999 to offer savers a way of saving without paying tax on interest earned.
Offering easy access to balances and designed to be uncomplicated, ISAs were seen as powerful budgeting tools that could help people channel their extra money away from the temptation of day-to-day spending.
Central to the unique appeal of the ISA is the fact that it offers a way of saving without the resulting interest being taxed. This can come as a surprise to many, who collect their surplus cash in alternative savings accounts and don’t realise that they’re being taxed on the interest they receive. So if you can only afford to have one savings account and you pay tax then a cash ISA is certainly worth considering.
Each tax year the ISA allowance is set by the government, dictating the maximum that can be saved from April to April. The limit has changed in recent years and you can now save up to £15,000 in 2014/2015 or £15,240 in 2015/2016 in either cash, stocks and shares or a mixture of the two.
If you’ve already got an ISA, don’t forget to make the most of the upper limit before the tax year ends on April 5th, if you can afford it. You must save or invest by the end of the tax year for it to count for that year as unused allowance doesn't roll over - so if you don't use it, you lose it. You'll get a new allowance the next tax year. Any savings or investments that stay within the tax-free ISA will continue to earn interest and reap the tax benefits until you withdraw the money. So if you haven’t already topped up, there is still time to do so to get the most out of your limit for 2014/2015.
As well as remembering to top-up, it is good practice to regularly review your savings accounts to ensure that they still meet your needs. This applies to your ISAs too. Plenty will offer competitive rates of interest, but these may include a short-term bonus which disappears after a period of time.
You should always look at what is best for you as there are different types of account and rates available depending on whether you need access to your money during the year or whether you can afford to leave it in one place for 12 months or more, alternatively you may want to deal with your account in branch or be happy to do it all online. ISAs can also be transferred between providers, which gives you ultimate control over your savings and allows you to take advantage of the accounts that appear in the market that work best for you and your circumstances.
Ultimately, effective saving is all about informed money management and adopting good spending and saving habits. Once you’ve mastered this, it’s about making sure that any money you save is working hard for you and earning additional income in the form of interest. While it’s clear that low interest rates have had an impact on the attractiveness of savings accounts, in truth, the pace of modern life dictates that there is probably more need for dedicated savings accounts than ever before, and ISAs can be the perfect vehicle for that.
So, as the financial year draws to a close, whether you’ve already got an ISA and want to top it up, or are thinking of opening one for the coming tax year, ensuring you’re maximising the benefits of tax-free saving can reap huge benefits down the line. And remember, it really does pay to be in the know.
Yn ogystal â chofio hynny, mae'n syniad da adolygu eich cyfrifon cynilo'n rheolaidd er mwyn sicrhau eu bod yn dal i ddiwallu’ch anghenion. Mae hyn yn berthnasol i'ch cyfrifon ISA hefyd. Bydd llawer ohonynt yn cynnig cyfraddau llog cystadleuol, ond gallai'r cyfrifon hynny gynnwys bonws tymor byr sy'n diflannu ar ôl cyfnod penodol o amser.
Dylech edrych ar yr hyn sydd orau i chi, gan fod nifer o wahanol fathau o gyfrifon, a gwahanol gyfraddau llog ar gael. Mae’n rhaid i chi ystyried a oes angen i chi gael gafael ar eich arian yn ystod y flwyddyn, neu a allwch chi fforddio ei gloi i ffwrdd am 12 mis neu fwy. Efallai y byddwch eisiau delio gyda'ch cyfrif yn y gangen neu eich bod chi’n hapus i wneud y cyfan ar-lein. Mae modd trosglwyddo ISAs rhwng darparwyr hefyd, sy'n golygu bod gennych chi’r rheolaeth eithaf dros eich cynilion. Mae’n golygu hefyd y gallwch chi fanteisio ar y cyfrifon newydd sy'n ymddangos ar y farchnad a dewis yr un sydd fwyaf addas ar gyfer eich amgylchiadau.
Yn y pen draw, mae cynilo effeithiol yn golygu rheoli arian yn ddeallus a mabwysiadu arferion gwario a chynilo da. Pan fyddwch chi wedi meistroli hynny, mae'n golygu gwneud yn siŵr bod yr arian yr ydych chi'n ei gynilo yn gweithio'n galed i chi ac yn ennill incwm ychwanegol ar ffurf llog. Er ei bod yn amlwg bod cyfraddau llog isel wedi effeithio ar apêl cyfrifon cynilo, y gwir yw, oherwydd prysurdeb ein bywydau modern, bod mwy o angen cyfrifon cynilion pwrpasol nag erioed, a gall ISAs fod yn berffaith ar gyfer hynny.
Mae diwedd y flwyddyn ariannol ar y gorwel.,Felly, p’un a oes gennych chi ISA'n barod a'ch bod chi eisiau rhoi mwy o arian ynddo, neu os ydych chi'n meddwl am agor un ar gyfer y flwyddyn dreth newydd, gallwch elwa'n sylweddol yn y dyfodol o sicrhau eich bod yn manteisio i'r eithaf ar fuddion cynilo di-dreth. A chofiwch, mae'n talu ar ei ganfed i wybod eich pethau.