There is less than a month to go before the end of the tax year on April 5, and if you haven’t used your individual savings account (ISA) allowance by this date, it’ll be gone for good.


This tax year you can shelter up to £20,000 in ISAs and returns are free of tax. You’ll get another £20,000 allowance when the new 2023/24 tax year begins on April 6, so in total, you could save up to £40,000 in ISAs if you haven’t yet used this year’s allowance. Using your ISA allowance might not seem a priority in these difficult times, but if you do have some savings available, it’s worth considering whether moving them into an ISA could benefit you.

Here’s what you need to know.

Returns are tax-free, however much interest you earn

Many people already don’t have to pay tax on their savings interest on money held in bank and building society accounts, thanks to the personal savings allowance. This enables basic rate taxpayers to earn up to £1,000 in savings interest tax-free while higher rate taxpayers can earn up to £500 tax-free. However, with ISAs, all returns are tax-free, regardless of how much interest you earn, which can be useful if you plan to add to your savings over the long term.

Sarah Coles, head of personal finance at Hargreaves Lansdown said: “Basic rate taxpayers with more modest balances may decide to leave their cash in savings accounts. Alternatively, they may decide that a cash ISA is an investment in their future – because it means they never have to worry about tax on their savings – regardless of what happens to their income, interest rates, or the personal savings allowance.”
If you invest in a stocks and shares ISA, you don’t have to pay income tax or Capital Gains Tax (CGT) on any profits

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ISAs are arguably more important than ever due to a series of tax changes from April that will see the taxman take an even bigger chunk of investment returns if held outside an ISA.

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Jason Hollands, managing director of online investment platform Bestinvest, said “Savers and investors face a looming pincer movement by the Chancellor on their hard-earned cash, with the amount of dividend income that can be received tax-free outside of ISAs and pensions set to be halved in the new tax year from £2,000 currently to £1,000 (and then reduced to a meagre £500 from April 2024).

“The amount of capital gains that can be crystallised tax-free each year also faces a savage cut with the annual exemption being slashed from £12,300 this tax-year to £6,000 on 6 April (with a further halving to £3,000 in April 2024).”

You may be able to make withdrawals and pay money back in without it affecting your annual allowance

If you put some or all of your ISA allowance into a flexible ISA, you can take money out and then replace it in the same tax year without this affecting your £20,000 annual allowance.

For example, let’s say you currently have £20,000 in your ISA built up in previous tax years. If you then withdraw £5,000, you can pay this back into the ISA during this tax year and still use your full £20,000 annual allowance before the tax year ends 5 April.

You can transfer from one type of ISA to another and returns will still be tax-free

You can move from a stocks and shares ISA to a cash ISA without your savings losing their tax-free status, or you can move your money the other way if your circumstances change and you’re comfortable accepting a higher level of risk.


Rob Morgan, chief investment analyst at Charles Stanley said: “The possibility of transferring from a cash ISA to a stock and shares hares ISA (and vice-versa) is a valuable flexibility not to be overlooked. The stock market offers greater opportunity to grow your money and has historically performed better than cash over the long term. If you have not invested before, you can use cash ISAs (or a portion of it) to get started and build the foundations of an investment portfolio. If you are already an investor, you can use it to add to one.”

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