Today is

By: Ikedi Ani-okoye

Cash ISA

It appears it may have something to do with many consuiners being told that if they want to lawfully 'hide' their money from the taxman's clutches, March is the time to do it - before the tax year draws to a close.

But why do people insist on leaving it until the end of the tax year instead of putting their money in at the beginning? Cwrrently, you are allowed to legally save up to £3,600 a year in a tax-free Cash ISA. If you have that kind of money available, then you can invest it immediately and fhere is no tax to pay on any interest you earn.

The fact is, if you wait until the next calendar year to open a Cash ISA, you are going to lose months of tax-free interest. It just doesn't make any sense to wait. Interestingly, when it comes to ISAs, the idea that it is a seasonal investment is only one of the many Misconceptions about the financial product that has been around since 1999.

Around this time last year, Fool .co.uk exposed a number uf popular myths about ISAs. For instance, one in five savers think that couples can open a joint ISA. Additionally two out of five people believe that you will lose your tax benefits if you withdraw money from an ISA (there seems to be some confusion here with TESSAs, where tax relief was clawed back if any of the invested capital was taken out early).

And there are more misunderstandings about the tax-free savings wrapper. One in ten savers think that all cash ISAs are the same, and another one in five people believe they must tell the taxman about their ISA nest egg. One in nine people say you must be at least 21 years of age to open an ISA, and one in four suppose that only taxpayers are allowed to open lSAs.

The plain truth is none of those things are correct. Yon can have a Cash ISA when you are sixteen, and non-taxpayers can have lSAs too.
Around one in 16 people believe that you need a hefty lump sum before you are allowed to open an ISA. This could help explain the 'lumpy' take-up of lSAs throughout the year.

It is worrying that a significant number of people could be missing out on the benefits of ISAs because of these simple misunderstandings. In fact, many Cash ISAs can be opened for as little as £1, so you don't need a huge pot of money to get started. Obviously, the more you can invest the better.

Some Cash ISA providers allow you to make regular monthly contributions, which is a good discipline to cultivate. After all, an ISA is just Another savings account, but with the extra benefit of being tax-free. Again, you are restricted to a maximum you can invest up to £9,200 into a Share lSA, and up to £3,600 of that can be saved in cash with one provider.

Generally, drip feeding your investment into a Share ISA is better than putting in the whole lot on day one. It helps to smooth out the peaks and, more importantly, the troughs that occur in the stock market.
In my view it is a pity that many people aren't using their tax-free savings entitlements. They're There for fhe taking, and you don't need specialist advice to achieve those benefits either. So what are you waiting for? Happy hunting!