Things to remember when choosing your ISA


There’s a lot of good news for ISA savers this year - the limit has increased to £15,240, there’s a new ISA designed to help first time buyers and new flexible rules will come into effect in the autumn. However, restrictions do still apply and it’s worth remembering some important points to make sure that you get the most out of your ISA.

1.Know your limit

Your allowance for any given year is your limit - not a penny more, not a penny less. For example, if you do not pay £15,240 in to your cash ISA before the end of this tax year (midnight on April 5 2016), you will not be able to carry it over to the next tax year.

You are not allowed to go over your limit either. If you inadvertently do, contact HM Revenue & Customs (HMRC) on their dedicated ISA Helpline on 0300 200 3312. They will be able to give you instructions about what to do next.

2. Don’t forget your old ISAs

Every year, billions of pounds are invested in ISAs (around £57 billion was subscribed to Adult ISAs in 2013-14, according to Government statistics). People do a lot of research to make sure they are buying the best product to meet their needs and deliver a healthy profit rate. However, what many people don’t realise is that it is also possible to switch cash ISAs from previous years and reap the benefits from those too. 

3. Realise that you can’t contribute to a cash ISA and a Help to Buy ISA in the same tax year

The new Help to Buy ISA is a type of cash ISA, and therefore you will not be able to have a Help to Buy ISA and a cash ISA in the same year.

4. Remember that you and your spouse both have ISA allowances

If you’re married, you and your spouse both have an individual ISA allowance of £15,240. This means that, as long as you both meet the criteria for having an ISA, you could potentially save £30,480 a year between you. To find out more about the criteria for ISAs, please see last month's article - Top tips for choosing the best cash ISA.

5. Know the restrictions of your cash ISA product

When the new "fully flexible" cash ISA launches later this year, don’t assume it means that you can take money out of your ISA. Whilst you will have the flexibility to be able to take money out of their ISAs and put it back in, without it counting towards the annual ISA allowance, the features of your ISA will depend on what type you have.  If you have invested in a fixed term or notice cash ISA for example, you may lose profit. If you are in any doubt, speak to your ISA provider.

To find out more about Al Rayan Bank's range of ISAs, which are based on the Islamic finance principle of Wakala and provide a Sharia compliant and ethical way to save tax free, please click here or call our Customer Services team on 0800 4086 407. 

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