Making the most of your ISA before the tax year ends

ISAs are subject to certain qualifications that follow the financial calendar. The end of the tax year signals financial resets, such as a maximum contribution limit. It’s important to understand these rules so that you can make the most of your ISA allowance as the tax year comes to an end.

Don’t waste your £20,000 contribution limit

You can contribute up to £20,000 per tax year into your ISA. This limit is set whether you have one or several ISAs. Therefore, when approaching the end of the tax year, you should try to utilise as much of your remaining limit as possible before it’s lost and reset for the next tax year.

You won’t be able to carry any of this limit over into the next tax year and you’ll lose out on the contributions you could make together with the tax-free interest you’d make from those ISA contributions.


Maximise your LISA bonus

If one of your ISAs is a Lifetime ISA (LISA), consider contributing as much as possible to your LISA before the end of the tax year, up to the £4,000 LISA contribution limit. This way you will benefit from the 25% government bonus (up to £1,000) that’s only available for Lifetime ISA holders. The bonus is on top of your tax-free interest.


Invest in multiple cash ISAs

A lot of providers only allow you to contribute to one cash ISA per tax year. At Newcastle Building Society, our CustomISA allows you to create a package of cash ISAs to spread your £20,000 annual tax-free allowance across as many Newcastle cash ISA accounts as you like. This way you can meet your individual savings goals and still get tax-free benefits. For more information about this, you can read about our CustomISA or contact us today.


Look for competitive deals

Providers often try to attract new customers at the start of the tax year with competitive ISA offers. Before committing to a cash ISA, look for the best deal possible as providers often begin to release their offers towards the end of the tax year. Consider providers offering high interest rates, low minimum payments and few restrictions.

Make sure to check your new provider accepts transfers and whether there are any fees attached to it.


Watch when you withdraw

In April 2016, flexible cash ISAs were introduced. These allow you to withdraw and redeposit money into your ISA within the same tax year without effecting your contribution limit. For example, if you deposit £1,000 into your cash ISA then withdraw £300, you will have only used £700 of your contribution limit.

This applies to previous tax year funds as well as money deposited within the current tax year. For example, if you hold £30,000 in a cash ISA (£20,000 from previous tax year and £10,000 from current tax year), you’d have £10,000 remaining of this tax year’s allowance. If you were to withdraw £15,000, you can deposit a further £25,000 in this tax year – the £15,000 you withdrew plus your remaining £10,000 ISA allowance for this tax year.

Before flexible cash ISAs were introduced, the contribution limit was inflexible. If you contributed, for example, £1,000 but then withdrew £300 a month later, you would have still used £1,000 of your contribution limit.

Check with your provider to see whether there are any penalties before making any withdrawals.

Thinking about opening a cash ISA with us? Check out our guide to cash ISAs to answer any queries you may have. If you’re interested in opening a Lifetime ISA (LISA), take a look at this breakdown of our LISAs to decide if they are right for you.