THE LAST-MINUTE Isa frenzy is underway. But as you scramble to fill up the £11,520 allowance before 5 April, be wary of some of the most common mistakes made by hasty investors.
Buying funds and stocks in a hurry is dangerous, says Jason Witcombe of Evolve Financial Planners. And as most stocks and shares Isas come with a “cash park” facility for capital pending investment, there’s no reason to rush before the deadline. Parked cash will earn a measly return (currently 0.1 per cent at Fidelity), but at least you can protect your money from capital gains and income tax, and can make investment selections another time.
Isa platforms vary widely in how they charge customers, and it’s easy to end up with an unsuitable price structure. “Make sure that you are minimising your overall costs to maximise investment returns,” says Rebecca O’Keeffe of Interactive Investor. Larger amounts of capital will typically be better off in a flat-fee environment, for example, while highly active investors should seek to minimise dealing costs when buying and selling funds and shares.
If you’re also transfering capital from old Isas, avoid what Ben Smaje of Kennedy Black calls the “cardinal sin” of pulling the cash out yourself and losing the tax-sheltered status on the investments. Make the transfer through the institutions and the tax wrapper will be preserved.
Finally, O’Keeffe says a surprising number of last-minute Isa investors have payments blocked by their bank, and miss the tax year deadline. Alerting your bank in advance can stop you from losing out.