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MONEY COMMENT
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I can never understand why people always seem to wait until the last minute to get an ISA. Every year around February/March time there's always seems to be a rush to open one before the end of the tax year. What's wrong with doing it now? For example, if you wait until next March to open a Cash ISA you're going to lose eight months of tax-free interest. It doesn't make sense to wait. To re-cap on how ISAs work, there are three types. One is for cash, one is for stock market investments (equities) and one is for life insurance savings. These are Mini ISAs and you're allowed to have one of each every tax year. Alternatively, you can have an all-in-one ISA which contains all three elements of the Minis. This is a Maxi ISA and you're only allowed to have one of them each year. There's an extra perk with a Maxi and that is that, if you prefer to invest totally in shares then you are allowed to put your entire permitted contribution into equities as long as you do it within a Maxi. Either way, it's important to remember that you can either have three Minis or one Maxi at any one time. You can't pay into both a Mini and a Maxi at the same time. There are restrictions on how much you can save in your ISA each year and it depends which type you've got. If you have one each of the Mini ISAs, the limits are as follows: It means that you can save and invest up to £7,000 in total each year. The same goes for the all-in-one Maxi – you can save up to £7,000 each year with £3,000 going into cash, £3,000 into shares and £1,000 into the insurance element. If you opt for the perk the Maxi offers then you can invest all £7,000 into shares. The best thing about ISAs is that the interest on your cash savings is tax free, and any profits made from your stock market investments are free of Capital Gains Tax. At the moment there's an extra advantage in that standard rate tax payers can reclaim a 10% tax credit on gross dividends if they are paid on shares within an ISA. This small benefit is being abolished next April so it makes sense to take advantage of it now. In fact, it makes sense to take advantage of all the ISA benefits now. Why wait for the rush? Find out more about ISAs