With the Chancellor rumoured to be considering reducing cash Isa (individual savings accounts) limits to £4,000, now may be the time to take action to maximise your allowance.
As it stands, savers are entitled to a new £20,000 tax allowance every tax year, with interest exempt. With rates at 4%, you could currently earn £800 a year tax-free. However, with potentially less generous limits on the horizon, here are a few steps you can take in order to build up a tax-free nest egg.
Firstly, ensure you maximise your Isa allowance. It is worth transferring money from standard savings accounts into a cash Isa, a step that won’t save you tax now but will reap dividends in the longer term as savings increase.
You could also switch a fixed-rate bond into a fixed-rate Isa as it matures. These typically pay less than typical accounts but will save on tax. With a cash Isa limit reduced to £4,000 it would take five years to accumulate £20,000 rather than just one.
You could alternatively mix and match simple-access and fixed-rate accounts. It is worth keeping an eye on rates with a view to switching in the event of a drop. It is easy to transfer your cash Isa to a different provider or account, and worth looking out for 4.5% offers in available easy-access accounts
Finally, you should make a note of the maturity date, when the fixed-rate expires. Be careful not to get reassigned to a low-rate account by default when the term ends.
If you’re in the North West and looking for savings advice in Cheshire, contact our specialist team at Hartey Wealth Management today.
