Clare: Hello I'm Clare, and welcome back to Smart Investor, the series that helps you get to grips with investing. If you haven't used your ISA allowance yet there's not long left to do so, as the tax year ends on the fifth of April. However, every year millions of people fail to make use of this tax allowance. Our recent Twitter poll found that 56 percent of you aren't planning on using your ISA allowance this tax year. Obviously, for some there are very good reasons such as not being able to afford to save having other financial priorities, or deciding that there's insufficient tax benefit for them. However, another major factor is the fact that many people are confused about what exactly ISAs are and how they work. So, we hit the streets and asked people what they wanted to know about ISAs. Please bear in mind that we can't give personal advice, so if you don't feel confident about making an investment decision on your own, do seek independent financial advice. But we do try and help explain some of the key things relating to investing to help you when it comes to making your own decisions about what you want to do with your money. First, let's hear from Jasmine.
Jasmine: I would like to know what an ISA is.
Clare: An ISA, or individual savings account, is a savings product that allows you to put money away each tax year, without having to pay a penny of tax on any income or gains you make. You can keep that money in cash or invest it. The tax year runs from the sixth of April to the fifth of April and the current ISA allowance is 20,000 pounds, meaning you can put up to that amount into an ISA and any returns you make on that money, won't be liable to tax. Don't be put off if you don't have 20,000 pounds to put in though, that's the maximum you can invest this tax year, but you can open an ISA with far less than that, so just save what you can afford to. You need to bear in mind though, that some levels of income and gains received outside of ISAs are not subject to tax anyway. Let's now hear from Joel.
Joel: I'd like to know if there's a way in which you can take things out of ISAs without losing the tax benefits, so that if you need to temporarily use some of the money, you've got a little liquidity problem, you can put it back in and within a timeframe and you don't lose the tax benefits.
Clare: Absolutely, rules introduced in April 2016 allow you to withdraw money from an ISA and return it in the same tax year without it affecting your current ISA allowance. So for example, if you've already invested 15,000 pounds of this year's 20,000 pounds’ allowance, but need to take 5,000 pounds of it out again you could pay that 5,000 pounds back in before the tax year ends on the fifth of April plus the remaining 5,000 pounds of this year's allowance you haven't yet used is still available to you. It's worth noting though, that not all ISAs are flexible, so you will need to check with your provider before making a withdraw if you're unsure. And remember that with investing within ISAs, like all investing activity, should be ideally over a long time period of five years or more. If you sell investments to withdraw money you may lose out. Although, there's always the risk that you could lose money if you sell your investment at any stage. Let's now hear from Susan.
Susan: How much can I put into an ISA every month?
Clare: As I mentioned in the answer to the first question, there is a limit to the amount you can put into an ISA each tax year, it's currently 20,000 pounds, and you don't have to invest it all at once, so you could put money in monthly over the course of the year. As long as you don't exceed the annual allowance there's no maximum to the amount you can pay in monthly, but if you wanted to invest the same amount each month and use your full 20,000 pounds’ allowance, you could make 11 instalments of 1,667 pounds and one of 1,663. We have loads of more information about ISAs on our website including one video that explains what an ISA is in more detail and another that looks at ISA flexibility and how it works. But I hope that's been useful and thanks for watching and see you next time.