Do you have a Cash ISA? Do you have some spare cash to top up your Cash ISA? When is the best time to invest that cash in your ISA?
A Cash ISA is a bank account that you can put money into, just like any other bank account.
The key difference is that if you are a UK taxpayer, you do not pay any tax on the interest accrued in your Cash ISA account.
This is quite a bonus. Just think that if you earned £50 interest in a normal bank account, 20% of that would be paid in tax before it hits your account, so you only actually get £40. But with a tax free Cash ISA you pay no tax on the interest, so you receive the full £50.
The government puts a cap, an upper limit, on the amount of money you can add to an ISA in any one tax year. Tax years run from 6th April to 5th April the next year.
Over the years this upper limit for new deposits has increased significantly. It used to be around £3000 but is currently more than £15000.
When the upper limit was lower, it made sense to top up your ISA in March, if you had the spare cash. This meant that you could take advantage of your full £3000 tax free allowance for that tax year, and then have another £3000 tax free allowance to make use of in the next year.
However with annual tax free allowances now over £15000 the same rush in March isn’t really necessary.
Since most average people will not be able to save anywhere near £15000 per year, you don’t need to worry about when to top up your Cash ISA. Just top up your ISA when you have some spare cash. With upper limits this high, you will almost certainly be fine depositing at any time of the year.
The only exception would be for those fortunate individuals that might hope to save £15000 tax free every year. If you are lucky enough to be in that group, the old guidelines still apply, try to top up your Cash ISA before 5th April to make use of your full tax free allowance for the year.