Home Lifestyle Martin Lewis issues ISA warning – and savers must act before Friday

Martin Lewis issues ISA warning – and savers must act before Friday

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When Martin Lewis talks, it makes financial sense to listen (Picture: Rex/Getty)

Martin Lewis has urged Brits to set up ISAs before Friday, in an effort to ensure savers make the most of their money.

The Money Saving Expert founder warned that the end of this tax year (April 5) is the last chance to nab a bonus on your savings – and missing out could cost you thousands.

In a recent newsletter, he explained: ‘Every UK adult gets a £20,000 allowance where you can put money away as savings or investments to protect it from tax…

‘If you don’t use the year’s allowance, you lose it on April 5.’

While you can’t carry over the allowance, any money you put into a cash ISA each year (up to £20,000) stays tax-free year after year. That means you could in theory transfer £20,000 now and then £20,000 after April 6, and it would allbe excluded from your tax bill.

Normally, interest on savings is taxed, although the first £1,000 for those who pay 20% or the first £500 for those on the 40% tax rate is exempt as part of the PSA (personal savings allowance).

This might seem high, but you need far less saved than you might think to bust the limit: at 5% interest, a 20% rate taxpayer would earn enough to pay tax with £20,000 saved, while a 40% rate taxpayer would earn enough to pay tax with £10,000 saved.

In a cash ISA, however, you can keep far more of what you accumulate, which is why it’s so important to act now.

MSE recommends looking into the accounts with the highest interest rates – many of which currently beat those available with regular savings accounts -and applying ASAP.

The website states: ‘Don’t leave this till Friday. Many firms shut applications days before, as they need processing time. So sort as soon as you read this (if not sooner).’

Alongside the interest rate, check whether the account you’re opening allows you to access the money without losing out. Fixed cash ISAs often carry a penalty of 90 to 180 days worth of interest if you make a withdrawal, so if you need to factor in emergencies, an easy access option may be better.

The tax year impacts stocks and shares ISAs and junior ISAs too, and while the benefits and allowances these accounts offer are slightly different, if they suit your needs better, you still need to act fast to meet the April 5 deadline.

And even if you don’t have savings to think about, there are plenty of other ways you can boost your bank balance ahead of Friday.

According to Martin, those who are either married or in a civil partnership could be eligible for a marriage tax allowance worth up to £250, while anyone who claimed PPI payouts in 2019 has until the deadline to reclaim the tax back.

This is also the last date you can claim a rebate for an incorrect tax code in the 2019/2020 year, or for the ‘uniform tax allowance’.

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