Make the most of the Financial Year!

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Tax rises are inevitable; even the Chancellor has admitted as much. It is vital to protect your income and capital from the taxman now whilst the options are available to you and doing so can be easy.

If you are unsure of the investments to choose now, or uncertain about the markets – don’t let this be a reason to delay and miss out on the valuable tax allowances. You can park your ISA or SIPP contribution as cash for 3 months at 2% gross.

Within ISAs and SIPPs you pay no capital gains tax and no further tax on the income.

You can withdraw money from an ISA whenever you need it. The SIPP has more restricted access but that’s its strength. Your money is ring fenced to provide for your retirement – from age 55 (50 until 2010). In return the government offers generous tax relief. You can contribute as much as you earn into pensions if you are employed or self- employed – effectively up to a maximum of £235,000 gross – giving you a tax saving of as much as £94,000. Even if you have no earnings or you don’t pay tax you can invest £2,880 and the taxman will add £720.

ISA (Individual Savings Accounts)

Invest up to £7,200 before 5th April
Access your money when you want.
An ISA can contain two components:
1. A cash component: a cash deposit that is similar to any other ordinary savings account, apart from the tax-free status. A TOISA must consist solely of a cash deposit.
2. A stocks and shares component: the money is invested in 'qualifying investments' consisting of any combination of stock market equity investments (with no geographic restriction), public debt securities such as government or corporate bonds, or cash "awaiting investment". As a consequence, the risk profile of the ISA may be anything from low to high. The investments may also include or consist of property funds or derivatives such as options. This element may be self-invested and managed through a stockbroker, but the majority of investors invest collectively through a collective investment such as a unit trust, OEIC or investment trust.

SIPP (Self Invested Personal Pension)

A pension plan wrapper that enables investment in stocks, shares, investment funds and commercial and residential property.
There is a lifetime limit of £1.5 million from April 2006, increasing annually.
A SIPP provides the tax advantages and legal framework for investments for retirement
Tax benefits mean a £10,000 investment could effectively cost you as little as £6,000.

If you're interested in making the most of your money this year, then you need to get cracking! Even with the interest rate being virtually nil, most of the best financial establishments are offering 3.51% interest on ISA savings, such as the Natwest Cash ISA for savings from £1 up to £3,600.

Hargreaves Lansdown are offering a market beating 5.5% interest on over 1,700 funds when you take advantage of their maxi ISA* option.