If you are considering saving some of your contract rate away and are uncertain where to invest then a cash ISA could be the answer. A cash ISA is still king despite low interest rates, offering investors the potential for higher long term returns. In the new rules announced by the Chancellor George Osborne in the 2014 Budget, there are even greater opportunities for Contractors to save a significant pot of money without paying any tax on the interest earned on cash.
The clock is beginning to tick away and Contractors may be missing out on a significant savings opportunity over the next two months by not exploiting the ISA allowance. According to the Halifax awareness of the new limits is relatively low only one in four savers aware of the new increased ISA allowance, which becomes effective from 1st July.
Nearly 30% of the poll of individuals researched by the Halifax still had a lack of understanding of the changes made to ISA’s. There seems to be some confusion about how much can be saved in an ISA and exactly over which duration. As a result Contractors could potentially be missing out on the tax-free savings over the next few months as you can begin to save now and then top up to the full allowance in July.
In the 2014 Budget the Chancellor announced that British savers will be able to save up to £15,000 a year tax free from July 2014, this is a significant increase from the previous £11,520 limit and the current £11,880 limit. Under the new rules Contractors can save the maximum £15,000 into any combination of stocks and shares into a New ISA (NISA) and thereafter transfer funds freely between cash, stocks and shares.
Most ISA’s will convert to a NISA in July meaning a further £9,060 can be put in to a cash ISA. Contractors who want to stick with cash can save up to £5,940 over the next few months and potentially add the further £9,060 from July.
Also from July, it will be possible to have one cash NISA and one stocks and shares NISA a year as long as the total contributions stay within the £15,000 allowance.
Contractors should aim to use up to the total allowance each year £15,000 could be enough for you to ensure all of your savings are healthily kept in a NISA therefore building up a significant savings pot year on year and benefitting from tax free growth.
More than ever a NISA is a very positive savings tool as the transfer between cash and stocks can be so fluid. This is an ideal mechanism for saving a deposit towards a new home, as you can access and transfer the money saved with such ease.
If you are looking to put away a savings fund for your child for the time when they head off to University, a Junior ISA could be the perfect tool for saving for your child’s future and cannot be touched until the child reaches 18. Contractors investing in a Junior ISA still have an entirely separate allowance for themselves so this could be a supplementary savings plan in addition to your own.
There are currently two types of Junior ISA, a cash ISA and stocks and shares ISA. Depending on the time frame in which you want to invest, the Advisers at ContractorFinancials can help you decide which offers the best home for your investment.
Contractors can save up to £3,840 in the 2014/15 tax year in to a junior ISA without paying any tax on the interest or dividends. This allowance will increase to £4,000 from 1st July.
Cash Junior ISA’s are considered less risky than a stocks and shares ISA. However, Contractors may wish to consider a stocks and shares ISA due to the longer term nature of the investment in your child’s future, especially if the ISA is established from an early age. If you open up the Junior ISA when your child is relatively young the potential growth offered with stocks and shares is far greater than investing in a cash ISA.
For Contractors, a Junior ISA could be the ideal solution to saving for your child’s future, without affecting your own personal ISA allowance.
To find out more about how you could benefit from the increased ISA and Junior ISA allowances contact the specialist Independent Financial Advisers at ContractorFinancials on 0208 090 0702 or email firstname.lastname@example.org and an Adviser will be in touch.