Important Information for ISA Account Holders

Whether you already hold an ISA account or are considering opening one during 2010-11, there are some important developments to be aware of regarding the end of the financial year in April. In addition, there are other developments planned that are set to change the amount of money that can be lodged in an ISA during each financial year, which investors should be fully aware of.

The first and arguably most pressing issue for existing and potential ISA account holders is that the current financial year ends on April 5th. There is nothing unusual about that of course, but it is a timely reminder to those with ISAs to ensure they have made all payments into the account they want to for the current financial year.

As such, it makes sense to invest any money you want counting towards your 2010-11 investment well before this date to avoid any chance of missing the deadline, and thus running the risk of having the deposit only count towards your 2011-12 investment instead.

If you are seeking to open an ISA account before the end of the current financial year, then it makes sense to give yourself as much time to do so as possible. If you are seeking the best ISA deals then compare all the options available. Not all ISAs offer the same degree of access to your money and you may have to make decisions as to which type of ISA suits your situation. For example, you may have to decide whether you would prefer to have a higher rate of interest payable on your investment but have little access to the money for a sustained period, or have much greater access to your cash, but receive a lower rate of interest on your savings.

Of course, searching through these options can be a time-consuming process and if you leave this to the last minute, you may find yourself up against all sorts of time constraints. Most providers prefer to have all their paper applications with them as early as possible before April 5th to ensure that the applications are registered for the current financial year. Other providers accept applications online up to midnight on April 4th, but it would be far more beneficial to have been able to compare ISAs without being forced into making a decision quickly, simply to register your ISA before the deadline.

Many savers who use ISAs often choose to make their investments for the current financial year at the last minute and occasionally problems can arise, such as people can forget, issues at home or at work demand your attention and mean you miss the deadline. This could mean people miss making the investment they would prefer for the current financial year and this, in turn, has a knock-on effect on the levels they can invest in the next financial year.

In short, it is best to ensure you have set up your ISA and made any investment in it for the 2010-11 financial year well before the April 5th deadline!

There is also plenty of other information that ISA account holders need to be aware of, which applies not just for 2010 but also subsequent years. Firstly, it is important to note that the amount that can be invested in an ISA has risen to £10,200 this year, which is an increase of £3,000 from the previous financial year. Investors can choose to invest the full £10,200 in a stocks and shares ISA, or they can place up to £5,100 in a cash ISA with any extra going into a stocks and shares ISA. Investors can choose to invest up to £10,200 in either ISA but only £5,100 may be placed in a cash ISA in any one year.

To confuse the matter still further, governmental legislation first outlined in the 2010 emergency Budget means that from this year onwards, the limit on the amount ISA account holders can place into their account in each financial year will now be directly linked to the rate of inflation. This means that from 2010-11 onwards, the amount of money you can place into your ISA, be it a cash or stocks and shares ISA, or combination of the two, will increase annually. The annual increase is rounded up to the nearest £120 to help those who pay into their ISAs on a monthly basis.

So, for example, in the 2011-12 financial year, the cash limit on cash ISAs will rise £240 to £5,340 a year, while for stocks and shares, that limit will increase £480 to £10,680; meaning investors with a cash ISA can invest a further £20 per month into their ISA at no penalty, while those with a stocks and shares ISA can invest an extra £40 per month into this ISA.

It is therefore important to understand that it will pay to annually review the amount you are paying into your ISA to take into account the inflation-linked changes to the yearly limit. This enables you to maximise your return on your savings and ensure that you get a better rate of interest in the longer term.

One of the most effective ways to ensure this is to employ the services of an investment specialist, who can look at your investment portfolio and can manage and keep track of your investments, ensuring that the money you are putting aside is working as profitably for you as is possible in the current economic climate. The best ISAs have proven to be a popular way for many people in the UK to invest their money, often in tough economic times. With increased limits and the potential to save even more money tax free, it makes sense to ensure you are fully informed of how your ISA is performing and any refinements you may need to make to the account to ensure you are getting the most from your investment.