Five tips to boost your cash or stocks & shares Isa

The deadline for sorting your Isa is fast approaching thick and fast, with the end of the tax year now only six weeks away.

On April 5, this year’s £20,000 Isa credit will run out and any amount you haven’t used will be gone.

The good news is that when the clock strikes midnight, savers and investors will get a new £20,000 Isa allowance from April 6, but you should still try to use as much of this year as you can before then.

This is something that is even more important now as more people are at risk of having more of their wealth taxed outside of an ISA.

Much higher savings rates mean that it has become much easier to achieve the annual personal savings deduction of £1,000 for base rate taxpayers and £500 for higher rate taxpayers.

Above those levels, savers lose 20 percent and 40 percent of their tax interest, respectively.

Meanwhile, Chancellor Jeremy Hunt is staging a double tax attack on investors in the new tax year.

The tax-free allowance for capital gains is reduced from £12,300 to £6,000 and the tax-free allowance for dividends is reduced from £2,000 to £1,000.

A year later there’s even worse news when the capital gains tax deduction falls back to £3,000 and the dividend payout falls to just £500.

For the sake of your long-term wealth, it pays to hold investments in Isa stocks and shares and not lose a portion of the profits and dividends to tax – and then see the potential effect of that compound over the years.

Of course, the problem for most people is that they probably won’t be able to use their full £20,000 Isa allowance.

How many of us have the means to save or invest £20,000 of new money in an Isa each year?

This leads to the temptation to put the used up Isa credit in the ‘not my problem’ pile, but for many it is possible to use more of their annual credit than they think – often by recycling old money.

Here are my five tips for boosting your Isa – and read our Isa Investing and Saving channel for more ideas.

Get the best rate for your money Isa

The savings rate has improved significantly over the past year. They still can’t match inflation, but it’s essential to minimize that gap.

The best accessible cash ISAs pay more than 3 percent and the best one- and two-year fixed deals fetch more than 4 percent.

Legacy Isa savings are probably much worse than this, so check out the best deals in our Isa savings tables for cash and move your money.

Transfer old money to Isas

However, don’t make the mistake of taking your money out and paying it in a new cash Isa as this eats up your Isa credit. Instead, use the official Isa money transfer system to transfer money. This is much faster and easier than before.

You can also transfer old money Isa savings to Isa shares if you wish.

Move piggy banks to a cash Isa

If you have savings that you want to keep in cash, but are now at risk of getting caught in the savings tax net, move some of that cash to the shelter of a money Isa. You might be surprised how much of your Isa credit this can eat up.

Rates on cash Isa’s are lower than standard bills, but the gap has narrowed — and remember, if you end up paying tax on interest, you’ll probably lose any benefit from a higher non-Isa rate.

Read our five of the best money Isas roundups for our picks and bookmark it as it is regularly updated.

Sell ​​your investments and place them in an ISA

As I mentioned earlier, there is a major capital gains tax and dividend tax hike coming up, so if you have accumulated investments outside of an ISA, move them to the safe haven of a tax-free package.

You can do this through a process known as a Bed & Isa, which means you can sell and buy back the same investments.

With this you use part of your Isa deduction and part of this year’s wealth deduction. For those with healthy profits outside of an Isa, this could be a wise move before the tax-free amount more than halves on April 6. Read our guide to the best and cheapest stocks and stocks Isas.

If you don’t own a home, consider a Lifetime Isa

The Lifetime Isa was designed as an intermediate home between pension savings and a first home.

I think it’s a bit of a ‘meh’ product for retirement savings, I’d say investing in a retirement there is your better option. But for starters, a Lifetime Isa is a no-brainer.

That’s because premiums are automatically upgraded by 25 percent, putting you back to pre-tax at the base rate. This is a great direct return. However, remember that the money must either be withdrawn for a deposit on a qualifying first home or after age 60, or there will be a hefty penalty.

You can pay up to £4,000 a year to get the 25 per cent bonus and you must be under 40 to open one. Read our Lifetime Isa guide.