• By Malcolm Anderson
• Published 02/21/2012

Savers hand millions to the taxman every year by failing to maximise their Individual Savings Account (ISA) allowance. If you don’t use it before April 5, you’ll lose it – so here are some last-minute tips to ensure you make the most of it.

Choose the right one for you

Whether you opt for a stocks and shares ISA or a Cash ISA depends on what the account is to be used for, your timeframe and attitude to risk. If you need money in the short-term, say, then you’ll want to stick to cash ISAs to avoid seeing the value of your capital fall on the stock market. Alternatively, if you have a longer-term timeframe of five years or more and are happy to take some risk, then you may want a stocks and shares ISA to give your money greater growth potential. The value of investments can go down as well as up and you may get back less than you invested.

Maximising your allowance

You are allowed to put up to half the annual allowance in a Cash ISA. This means up to £5,340 in the current tax year to 5 April 2012 and £5,640 in the 2012-2013 tax year. Or you could put your full allowance in a stocks and shares ISA – of up to £10,680 this tax year or £11,280 for 2012-13. The eligibility to invest in an ISA will depend on your individual circumstances, and all tax rules may change in the future.

Tax Returns

One of the main advantages of ISAs is that because all income is generated tax-efficient, you don’t need to detail these investments on your tax return – which isn’t a fun task at the best of times.

Topping up your ISA

As long as you haven’t already paid in more than the annual allowance, and the ISA provider doesn’t impose any rules to prevent it, you can make an additional payment whenever you like, as long as it’s within that tax year. So top it up before it’s too late.

Consider the cost

If you have a self-select ISA, for instance, consider the cost of topping this up. This is because if youR17;re buying shares you’ll face a dealing fee each time you trade, so putting in large amounts less frequently can prove more cost-effective.

Taking money out of your ISA

Providing there are no terms and conditions to prevent you withdrawing money, you can take money out of your ISA whenever you like. However, there is a catch – as once you’ve taken it out, you’ve lost its tax-efficient status. This means ISAs encourage you to leave your cash in place and continue to build your savings.

Choosing a stocks and shares ISA

You can hold a number of investments in an ISA-wrapper, from an array of fund options to fixed-income, depending on your preference. Do your research and make your choice wisely to suit your risk profile and the aim of your ISA. For example, if you’re approaching retirement you may want to opt for income-producing investments to supplement your pension pot.

Remember the deadline

Depending on the provider you pick, deadlines vary considerably. To ensure you don’t miss out, get your skates on to complete your ISA application – and find out what the deadline is first. For example, online fund supermarkets tend to have later deadlines than those that require telephone applications. Waiting until the last minute risks leaving you with far fewer options.

Use it or lose it

Just a reminder!If you don’t save the full amount into an ISA each tax year, you won’t be able to roll it over into the next tax year – use up as much of your allowance as you can or you might regret it later.

But they are flexible…

ISAs can prove an important part of long-term planning. For example, they may form part of your retirement fund, and as they are flexible and don’t lock your money away, are particularly attractive to savers looking to supplement pension savings.

These tax-efficient wrappers have numerous benefits. As ISA season approaches, investment providers’ marketing activity is gathering pace, heavily advertising their ISA products and extolling the virtues of saving in them. So make sure you’ve got the knowledge to choose wisely and understand the benefits for you.

About the Author: Malcolm Anderson is an independent journalist writing about ISAs.