Banks spend a huge amount of money trying to persuade people to open ISAs at the end of March/before April 5th. Surely, if you haven't had an ISA through the year, you haven't earned any interest, and there's no tax to be paid on it? And you'd probably earn a minimal amount in those last two weeks. I can understand part of the sales drive targetting people wanting to open ISAs in the new tax year, after April 5th, but what's the point of opening one on, say, April 4th? Anyone follow my drift, or am I missing something?
Yes you're missing something. Once money is invested in the ISA it gains its interest tax free not just until the end of the tax year but for ever (subject to Gordo!).
Once we flop into the next tax year your chance of using this year's tax free allowance has gone, hence banks competing with each other for money in this period.
Presumably there is a surge of ISA deposits at this time of year, in a similar way there is a surge of buying smelly things in the Body Shop in December.
The limit is per tax year. So if you open one now you can put 3000 in now and another 3000 after April 6th, so you'll have 6000 earning interest tax free. If you waited till after April 5th you'd only have 3000 till next year.
snipped-for-privacy@privacy.net wrote in uk.finance about: Re: Why open an ISA account now?
[..]
I know this is the reason why the banks do this, but I have to say, I still don't get it!
I would have thought that the typical person wanting to invest in an ISA, similarly to any other savings account, would be putting aside some 'left-over' money *every month* throughout the entire year, depending on how their budget has worked out from month to month. So I would have thought that most people wanting to save in an ISA would therefore
*already have one* by this point in the financial year (and therefore can't invest in a _different_ ISA at this point in time)?
It strikes me that the only people able to respond to this advertising would be the rather affluent who just happen to have up to GBP 3000 kicking around which for some reason they haven't invested earlier in the year (which begs the question, why on earth not? [1]). I suppose there must be enough people lucky enough to be in this position to make it worth the banks' while..
[1] If there is anybody reading who tends to leave such sums of money just kicking around, I'll gladly offer to "look after it" for them, and they can get it back at any time, and I won't even charge for this service (because I'll be enjoying the interest in the meantime!) ;-)
On the other hand, this frenzy of advertising does serve to flag up potential good accounts for when *the next financial year starts* (assuming the interest rate remains the same), but the whole "beat the deadline" thing does still bemuse me..
I move all of my savings into an ISA at the end of a tax year. I do it at the *end* of the year because I can save close enough to the (cash) allowance each year that I don't want to waste my allowance by moving money in and out for large purchases. I don't however have enough income to be able to max out the ISA and still have other savings for larger purchases.
I get the point, but unless you are going to put it in now, and then on April 7th too, its pointless, as most people will be scrambling this time next year, so its an artificial deadline ?
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.