Major cash ISA update ahead of allowance cut with savers warned 'now's the time'
A major cash ISA update has been issued with savers urged to act NOW ahead of a planned and possible rate cut from Chancellor Rachel Reeves. The Labour Party MP could cut the allowance from £20,000 to just £4k in a brutal blow to savers.
Christie Cook, managing director of retail at Hodge Bank, said: 'The annual ISA allowance for the 2024/2025 tax year is £20,000. If you haven't already reached this limit, now is the time to top up your account.
"Whether it's through a Cash ISA, Stocks & Shares ISA, or Innovative Finance ISA, ensuring you fully use this allowance could result in significant tax savings.'
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She explained: 'Following the previous tip about maximising your savings by using your full ISA allowance, if you've been holding cash in a non-ISA account, consider transferring it to your ISA to benefit from tax-free interest or capital gains.
"This will allow you to gain more interest on the money you've been storing, by reaping the rewards of tax-free interest.
'For those with a longer investment horizon, a Stocks & Shares ISA could provide higher growth potential compared to a traditional Cash ISA. By investing within an ISA, any returns are tax-free, giving you the opportunity to build wealth over time without worrying about capital gains tax.
"Additionally, the tax-free nature of an ISA allows your investments to grow unhindered, potentially compounding over time. This makes a Stocks & Shares ISA an excellent option for those looking to build wealth over the long run, especially for retirement or other long-term financial goals.
'It's always a good idea to review your ISA portfolio before the end of the tax year. Our recommendation is to assess whether your current ISA investments are aligned with your goals and risk tolerance."
Ms Cook said: 'If you're unable to reach your £20,000 limit this year, our tip is to start planning ahead for the following year. Setting up regular contributions could help you maximise your ISA contributions throughout the next tax year, ensuring consistent growth of your tax-free savings.'
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