There’s a deadline in April to be aware of (Image: Getty)
ISA customers are being urged to think carefully about their cash balances in March, April – and even beyond into May.
Savers are being warned not to delay in topping up their savings, with only a few weeks remaining to maximise their tax-free allowance before the end of the current financial year. The deadline for the 2024/2025 ISA is midnight on April 5, 2025, and savers can deposit up to £20,000 into an ISA each tax year. Yet specialists are warning not to stop there – and think about May also.
Any unused allowance cannot be carried over and will be lost. Experts advise those considering opening a new ISA that many of the best deals currently on offer may be withdrawn before the start of the new financial year.
Because of this, it’s being advised to start shopping now to secure the account you want and contribute as much as possible to take full advantage of the £20,000 tax-free savings limit. Research from Paragon Bank indicates that nearly one in 10 cash ISA savers wait until the end of the financial year before hastily making a lump sum payment to maximise their tax-free allowance.
The majority, 67 per cent, invest at the beginning of the new tax year on April 6, while the remaining 24 per cent make regular contributions to their ISAs throughout the tax year. Data from the Bank of England reveals that March 2024 saw the second-largest increase in cash ISA balances during the 2023/2024 tax year.
The Bank’s figures show that cash ISA balances rose by £6.1 billion during the month, second only to April 2023, which saw an increase of £11.9 billion, reports
Paragon has highlighted that savers could be losing out by delaying their deposits until the end of the tax year. For instance, a sum of £20,000 accruing 4.3 per cent interest would yield £860 annually.
Depositing this amount into an ISA at the beginning of the tax year would shield all interest from taxation. However leaving it in a non-ISA account with the same rate for 11 months could result in a tax charge of £113.33 for higher-rate taxpayers and £352.50 for additional-rate taxpayers.
Paragon Bank’s Managing Director of Savings Derek Sprawling said: “The key months for ISA savers are March as the tax year draws to a close and April and May as the new tax period starts and the £20,000 ISA allowance resets.
“It’s normal for people to review their finances towards the end of the tax year and to utilise any of their remaining ISA allowance if they have spare savings. It’s a pattern we have seen over numerous ISA seasons.
“However, I would urge savers not to leave it too late as many providers take best buy accounts off the shelves in the run-up to the tax year end to manage their service levels. If you do intend to utilise your ISA allowance late in the tax year, give yourself enough time to get the account you want and don’t leave it until the final few days of the tax year.”