ISA Savings, know your limits!
ISA savings are a great, tax free investment. It seems quite incredible that our ever tax hungry government allows you to furrow away money to save without paying him a single penny for the privilege, but you must be aware there are limits to your ISA savings, you should try and use them to the max, but avoid the common pitfalls or you could end up very, very frustrated!
At the time of writing the annual ISA investment limit is £7,200. That’s the combined total for both cash ISAs and Stocks and Shares ISAs. Remember however that only £3,600 of that can be in cash ISAs, at the very most, but any percentage can be in stocks and shares.
The annual limit is for each tax year, this is important to note because, as many people we’re sure will be aware, the tax year, or financial year, is not the same as the January to December year most people deal with in their day to day lives.
You do not have to put all of your ISA investment limit in at the start of the year, or indeed in one go, but you can only open one account of each time in any given financial year. You can also often withdraw without penalty from your savings at any given time during the year without penalty, however any money you withdraw still counts towards your ISA investment total for that year.
As an example, if you were to put £2,600 into a cash isa (£1,000 short of your annual ISA savings cash limit for that year), and later on withdraw £1,000, you may still only deposit a further £1,000 into your ISA savings for that financial year, even though that will only take your balance to only £2,600. The point is you’ve reached your ISA investment limit of £3,600 in cash for that given time period. There is no way to avoid this limit, and as you may only open one account each year, you cannot open another ISA savings account with another institution to boost your annual tax free savings.