Nine traps & mistakes to avoid ahead of ‘confusing’ savings deadline in weeks

THERE are several traps and mistakes you need to avoid ahead of a "confusing" savings deadline coming up.deadline means there are just weeks left to use up their ISA allowances before they reset again.

Of course not everyone has spare cash to fill up an ISA but ignoring the allowance completely isn't a good idea, she said. For instance average cash ISA rates are now 3.36% compared to 2.01% last year, and easy access are 3.16% versus 1.85% in March 2023. "Whether making fresh contributions or transferring assets held outside a tax wrapper into an ISA, failing to take advantage of this tax allowance in full is equivalent to leaving your money under the mattress and not letting it toil away and earn interest for you."

Peer-to-peer lending matches up investors with borrowers, who could be individuals, businesses, or property developers. Meanwhile, the Help to Buy ISA has a cap of £200 per month, which also counts towards the £20,000 limit. If you breach the limit, again call HMRC’s ISA helpline and they'll assess how to rectify the problem.People often choose the wrong type of ISA for their saving goal, according to Alice."Selecting the right type of ISA for each of your financial goals is important."

"If you later decide to take out that £5,000, you will pay 25% of the full amount, so £1,250, which detracts from any bonus you receive.""Savers often move their ISA to another provider, for example to take advantage of lower fees or better rates " Alice said. "This is less of an issue for those with smaller ISA pots, as they are unlikely to use their allowance in full anyhow."This is because making the wrong move could see them lose the tax-free status on a very large chunk of money, making them liable for unnecessary tax charges.Savers maximising their allowance in an investment ISA often wrongly assume they must invest the money the moment the funds are added, Alice said.

So make sure you don't rush the investment but if you're thinking about opening one it could be a good idea to do so before April 5.The financial whizz also warned that it’s not just your £20,000 ISA allowance that needs to be used up by the end of the tax year.

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