UK-based digital banking challenger Starling notes that the end of the tax year is now “fast approaching.” This may be a good time to “make the most” of your tax-free allowances on Individual Savings Accounts (ISAs), the Starling team writes in a blog post.
Starling goes on to share how to take advantage or benefit from your allowances and how Fintech apps such as Starling and Wealthify are able to make investing a lot simpler.
While explaining what an ISA is, the Starling team notes that it’s a “tax-efficient” way to save or make investments. As noted in the Fintech firm’s blog post, a cash ISA provides “tax-free” interest payments and a stocks and shares ISA provides “tax-free returns.”
But Starling clarifies there’s a certain limit to how much money you may allocate into an ISA every tax year. For example, the ISA allowance for the 2020/21 tax year is £20,000, Starling noted.
The banking challenger pointed out that if you want to contribute to your ISA, then you have the option to make regular weekly or monthly payments. You may also decide to transfer “a lump sum,” Starling noted. For instance, you may set a particular savings target for your ISA and use the Starling Spaces feature to put funds aside, the Fintech company suggested. Then you may transfer the savings “over when your goal is reached,” Starling added.
You may even decide to switch on Starling Round Ups in order to assist you with reaching your goal or target more quickly, Starling recommended. The digital bank also mentioned that The Round Ups feature “adds spare change to your chosen Space – spend £5.50, set aside 50p automatically.”
Starling reminded users to make sure they understand the different ISA rules.
As noted in Starling’s blog post:
With a Cash ISA, you “can contribute up to £20,000 per year, and earn tax-free interest on this sum.” This allowance “can either be used just for a Cash ISA or split between a Cash ISA and other types of ISA, such as a Stocks and Shares ISA or Lifetime ISA.”
Stocks and Shares ISA
If you want to “give your money the possibility of more growth potential, a Stocks and Shares ISA could be a great option.” You “don’t need to pay tax on any profits you make and since it’s not a fixed interest product, there’s a chance for higher returns.”
Starling reminds consumers or taxpayers that it’s “never too late to use your allowances.”
The digital bank added that this tax year’s ISA allowances (in the United Kingdom) will “disappear from midnight on Monday 5 April.” So, if you still have not used your 2020/21 allowances, then this may be a good time to “put your money to work,” Starling recommends.
The bank also mentioned that it’s “up to you how much you invest and don’t worry if you can’t afford to put £20,000 aside – it’s possible to build a decent nest egg for the future with small sums, especially if you contribute on a regular basis and keep up the effort in the long run.”
(Note: for more insights and other details from Starling on ISAs, check here.)