5 Tips to Get The Most Out of Your ISA Allowance Before the April 5th Deadline

With the end of the tax year on 5th April fast approaching, it’s time to get your ISA in order before the deadline to fill your £20,000 annual allowance passes. But how can you get the most out of your individual savings account before the tax year ends? 

An ISA allows you to save or invest your money without having to pay any tax on your returns. Because there’s no need to pay out on the interest, income, or capital gains on your savings accounts, it remains one of the best ways to build a nest egg for achieving your financial goals. 

Each year, you’re given an allowance of £20,000 to save tax-free in your ISA, meaning that you can contribute this sum in a Cash, Stocks and Shares, or Innovative Finance individual savings account without any tax requirements. However, if you have a Lifetime ISA, your allowance is £4,000 instead. 

This limit resets at the end of every tax year on 5 April, before starting afresh on 6th April. Because of this, you must look to use your allowance to its fullest before the tax year is complete. 

While you’re perfectly capable of saving £20,000 on one side of the deadline and another £20,000 on the other, you can’t save £15,000 and then make up the lost ground on your allowance after the deadline. It’s for this reason that many ISA savers work hard to reach their annual limit by April each year. 

Although the prospect of saving with an annual deadline in mind may seem challenging, there are many ways to get the most out of your ISA allowance before the 5th April deadline each year. These include: 

1. Building Your Strategy Around the Tax Year

For many savers, the £20,000 can represent a significant portion of your annual income, making it a high bar to aspire to over the year. With this in mind, it’s worth setting a saving goal and building your strategy around the tax year. 

Whether you’re going for the full £20,000 allowance or are aiming for a more modest goal, setting yourself up with a plan can pay dividends by the time the 5th April deadline comes into view. 

Look at the funds you already have, and the amount of money you’re capable of saving before the end of the financial year. 

While some saving strategies suggest putting around 20% of your annual income into savings, this figure can be fine-tuned to ensure that you remain financially comfortable throughout the year.

If you have a clear savings plan in mind, you can create a standing order to put a portion of your money away each month passively. 

2. Diversification is Key

Adding diversification to your ISA investment strategy can be an excellent means of securing higher long-term returns without adding more risk to your Stocks and Shares ISA. 

In a nutshell, diversification is the process of dividing your investments across different sectors and asset classes, meaning that if one industry’s stocks begin falling, your portfolio will remain safe. You could also spread your Stocks and Shares ISA investments across shares, bonds, property, cash, and other assets. 

If you’re seeking to maximize your allowance before 5th April, always keep diversification in mind. Yes, tech stocks on Wall Street have been great for high returns in recent years, but spreading your investments further can help to ensure that your ISA is well-protected against downturns should new challenges arise in the industry. 

3. Invest Your Allowance How You Like

Have multiple ISAs and are unsure of where to save your £20,000 before April? Your tax-free allowance can be evenly distributed across your savings accounts, meaning that you can split it between investments into your Stocks and Shares ISA and building your Cash ISA. 

If you’re looking to save all the way up to your allowance by 5th April, it’s worth taking some time to figure out how you want to distribute your investments. Do you want to split your savings evenly between your Cash and Stocks and Shares ISAs? Or invest £15,000 and save the remaining £5,000? There’s no right or wrong answer and you can spend your allowance however you see fit. 

4. You Don’t Have to Invest Your Deposits Immediately

Aiming to top up your Stocks and Shares ISA before 5th April but unsure of how to invest the money before the deadline? Don’t worry. You’re free to make a deposit to your individual savings account before the deadline without choosing where to invest your money. 

As long as you store your money before the new tax year, you can make your investment choices after. This can help you avoid making any hasty decisions without properly allocating time toward building a sustainable strategy for how to get the most out of your deposit.

5. Is it Time to Consolidate Your ISAs?

While you can have as many ISAs as you want across multiple providers, you may find it much easier to combine your savings accounts into one to more effectively strategise your savings each tax year. 

You won’t lose your tax-efficient ‘wrapper’ status by consolidating your ISAs and you’re likely to significantly lower the volumes of paperwork you have to overcome when tracking the progress of your accounts. 

Acting Before April 5th

Each year, ISA allowance deadlines can feel as though they creep up faster and faster. It’s always a good idea to act sooner rather than later when it comes to strategising your savings and taking measures now can pay dividends when avoiding the panic of cramming your deposits at the 11th hour to build your tax efficiency. 

There’s no right or wrong way to save money for your future. But in taking these steps in good time before April 5th, you have the best chance of breezing into a new tax year and are as well equipped as ever to make your ISA work for you.