Martin Lewis issues urgent warning to anyone aged between 16 and 65 who could be missing out on £1,000s
MARTIN Lewis has issued an urgent warning to anyone between 16 and 65, as they could be missing out on thousands of pounds.
The consumer expert explained time is running out for eligible Brits to make use of their annual ISA allowance.
An ISA (individual savings account) is a type of savings account where you can save up to £20,000 each year tax-free - and some of them even offer free cash top-ups too.
The tax year ends tomorrow so anyone looking to take advantage of the tax-free savings and bonuses needs to put money into an ISA quickly.
Those on the younger side of the age eligibility need to be warned minimum age at which you open an ISA will soon be rising.
Each year, everyone over 16 gets an ISA allowance, which lets them save their cash tax-free.
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But on April 6 this will be rising from 16 to 18, meaning a 17-year-old will be able to open an ISA tomorrow but not on Saturday.
The only exception to this is Virgin Money's easy-access ISA.
It pays 5.01% and can be opened and managed online, though you can only withdraw three times a year.
Bear in mind as well that the rate drops to 2% from the fourth withdrawal onwards.
Martin says it's a good idea for 16 and 17-year-olds to open an account ahead of the deadline, even if you're not likely to max out the £20,000 limit.
You can open an ISA with as little as £1, though each ISA has its own rules about how much you can deposit each year and how much you can get as a bonus.
What are the different types of ISA’s?
Cash ISA
A cash ISA is a savings account you can put up to £20,000 per tax year where interest is never taxed.
They are similar to regular savings accounts and can be easy-access, notice accounts or fixed.
The age you can open a cash ISA is rising so anyone 16, or 17 looking to open one needs to do so before the end of tomorrow April 4.
Lifetime ISA
A lifetime ISA is a savings account which can only be used for two purposes buying your first home or saving for a retirement.
Unlike a cash ISA any money you put into a lifetime the government will top up your ISA by 25% until you turn 50.
You can put up to £4,000 in a lifetime ISA each year and the government will add an extra £1,000.
There is a deadline to put the maximum amount into a Lifetime ISA and this is also tomorrow April 5, if you want to get the bonus.
You can only use the Lifetime ISA to purchase a home that is up to £450,000.
You will have to pay a 6.25% penalty for withdrawing money from a Lifetime ISA for anything other than buying a property.
Junior ISA
Up to £9,000 per tax year can be put into a Junior ISA for under 18s.
It is a good option for parents wanting to build a fund for children before they reach adulthood.
Interest rates for different Junior ISAs vary but you can transfer transfer to existing JISAs or Child Trust Funds.
What is a Lifetime ISA?
FIRST-time buyers saving into a LISA can stash up to £4,000 into this account each year tax-free.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
For example, if you save £4,000, you'll get a £1,000 bonus.
The amount you pay in is linked to your annual ISA allowance (£20,000 for 2023/24) – for example, if you pay £1,000 into your LISA, you can still pay £19,000 into other ISA products.
Any bonus you earn doesn't count towards your ISA allowance.
You can open a Lifetime ISA with any bank, building society or investment manager that offers the product.
You can only open a LISA if you're aged 18–39.
You can hold multiple Lifetime ISAs, although you can only pay into one each tax year.
You can also transfer your Lifetime ISA to another provider, for example, to get a better interest rate.
If you want to use a Lifetime ISA to buy a home, there are a few restrictions you need to keep in mind:
- Only first-time buyers can use Lifetime ISAs to buy a home, which means you can't own, or have owned, a home in the UK or anywhere in the world.
- You'll need to be buying a home for no more than £450,000.
- You must be buying a home you plan to live in – the scheme isn’t for buying a home you want to rent out, or a holiday home.
If you don't use it to buy your first home, you can continue paying into a LISA until you're 50.
You can then make full or partial withdrawal from your LISA, without paying a fee, when you turn 60.
Stocks and shares ISA?
A stocks and shares ISA is an investment account.
You can invest up to £20,000 each tax year and pay no income or capital gains tax on your investments.
You can use this to invest in stocks, shares and bonds from various companies.
Depending on the provider you select you may have to pay a fee or pay a deposit.
With stocks, there is always a chance you might lose money so bear that in mind as well.
Can I have more than one ISA?
You can have more than one ISA open at the same time but you will still have a personal ISA tax allowance of £20,000.
That means if you have £20,000 in one ISA and £1,000 in another the extra £1,000 will be taxed.
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From April 6, you will be allowed to subscribe to multiple ISAs of the same type within the same tax year but allowance rules still apply.
Partial transfers of current-year ISA subscriptions will be allowed.
Don't miss out on tax-free savings
How does an ISA work?
An ISA is a type of savings account but with tax benefits: you don't pay tax on any interest you earn.
The most common types are cash ISAs and stocks and shares ISAs (where your money is invested in the stock market).
How much can I put in?
Everyone over 16 has an annual ISA allowance of £20,000. From the age of 16, you can pay into a cash ISA, but you must be over 18 to invest in a stocks and shares ISA.
How many ISAs can I have?
There is no limit to the number of ISAs you can have overall, but you can only pay into one of each type in a single tax year.
Remember: your annual contributions cannot add up to more than £20,000.
Can I take my money out of an ISA at any time?
If you choose to have a fixed-term ISA, you may earn more interest, but you can't withdraw your money before the end of the fixed term without losing that bonus.
Why does it make sense for me to max out an ISA?
ISAs are a flexible and tax-efficient way of saving for everyone – even under-16s can take out a junior ISA.
Allowing annual deposits to grow year on year can result in a tidy sum that you can withdraw tax-free when you need it.
What is a LISA?
A Lifetime Individual Savings Account (LISA) is open to anyone aged 18 to 39 who wants to save for retirement or buy their first home.
You can put in £4,000 a year, but there is a 25 per cent penalty if you withdraw the money before you turn 60 or for any purpose other than buying a first home.
How do I get a Government bonus?
You get a 25 per cent bonus on what you save into a LISA, so if you put in £4,000, that's a guaranteed return of £1,000.
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