The market for savers is hotting up at last – and there’s a surefire way of getting returns without paying a PENNY in tax. Just follow our guide to...




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Isa Special

SAVINGS strategies come in all shapes and sizes. Some of us are saving for this year’s summer holiday, others for retirement in decades to come. Some set aside a few pounds a month, others are already sitting on millions. But there is one element to saving that is almost universal: the Individual Savings Account – or Isa – is a saver’s best friend. Every one of us is allowed to save into an Isa each year without paying a penny of tax. Not tax on interest, not tax on investment returns, not tax on dividends – nothing. Once you’ve safely sheltered money in an Isa, it is free to grow year after year untouched by Revenue & Customs. Adults can stash away up to £20,000 every tax year; children can put away £9,000. How best to use your allowance will depend on your own circumstances, as our guide will talk you through, step by step. If you are saving for the short term, you may prefer a Cash Isa, where you can earn interest on your savings, but keep them sheltered from the whims of financial markets. If you have a bit longer, and are happy to see your nest egg rise and fall a bit in the hope of greater longterm rewards, a Stocks and Shares Isa may be more your bag. If you’re saving for your first home, or want to boost your retirement funds, a Lifetime Isa may be the way to go. Lifetime Isas have their limitations and are a bit fiddly. Wealth & Personal Finance Deputy Editor Toby Walne talks through how to make them work for you on Page 6. And if you’re saving for a child, the Junior Isa is the answer. Reporter Ruth Jackson-Kirby explains everything you need to know on Page 7. Junior Isas are a powerful tool to build up a nice financial cushion to help young people out in life. On Page 3, Group Wealth & Personal Finance Editor Jeff Prestridge shares his golden rules for using your Isa allowance. Don’t forget you don’t have to opt for just one Isa. You can split your Isa allowance between as many different types as you are eligible for – so long as you only pay into one of each type every tax year. So you may decide, for example, to put a few hundred pounds into a Cash Isa for easy access, and a few hundred in a Stocks and Shares Isa to help your longer-term plans. The key thing to remember is that Isa allowances do not roll over; if you don’t use it, you’ll lose it. The tax year ends on April 5, so if you want to make use of this year’s allowance you need to act sharp. Pressure, yes. But there are ways to get around it. For example, if you are confident that you would like to invest through a Stocks and Shares Isa, but don’t have time to decide what to invest in before the deadline, you can park your money in one as cash and decide how to invest later on. Just bank the allowance and work it out when you have more time. Similarly, if you have money to put into a Cash Isa, but don’t have time to find the best rate, top up an old Isa and transfer the whole sum to a better account when you can. That said, don’t be put off by thinking opening an Isa is arduous. Most providers allow you to open an Isa in a few minutes online or using their app on your smartphone. Some Cash Isas can be opened in branch or by post. Beware though – several high street banks keep their best rates for online customers only. Cash rewards are back, finally CASH Isas are by far the most popular kind. They outnumber the second favourite – Stocks and Shares Isas – by at least three to one. Close to ten million Britons have a Cash Isa – and this year they are finally being rewarded for hanging in there. For years, interest rates on them have been woeful. Most savers would have been getting a few pennies or pounds on their savings. Hardly a reward for the discipline and restraint required to put money away for a rainy day. Most people who once relied on their interest as an income to live on gave up on that strategy years ago as rates remained in the doldrums. But in recent months – as the Bank of England base rate has risen – things are hotting up again. Savvy savers can now get rates above three per cent in an easyaccess Isa. Those who are willing to stash their money away for a year or more can get well over four per cent. However, sadly, if you want the best rates, you are going to have to work for it. Most of the high street banks are putting their fingers in their ears and ignoring the fact that the Bank of England has been raising the base rate with some frequency. It’s now at four per cent. The rates they offer look only slightly less pitiful than they did last year when the base rate was still just 0.75 per cent. So if you want the best rates, you need to stay on your toes, shop around for the best deals – and act fast to beat this year’s deadline. I think you’ll find it’s worth it. Not only could you seriously boost the interest on your savings, you’ll have the satisfaction of shifting your money away from a savings provider that has been exploiting your loyalty and making profits at the expense of your inertia. We hope this guide helps you to make the most of your Isa allowance to help you grow your wealth. Because we know that savvy saving isn’t just about beating the banks, rejoicing in the best rates or finding the most lucrative investments. It’s about our hopes and dreams; whether we can go on holiday, what kind of lifestyle we’ll enjoy in retirement, how we’ll be able to help our loved ones. So happy saving, and planning for the future you want.