The Isa deadline refers to the time of the year before your Isa allowance resets – and it’s often preceded by savers trying to use up as much of their allowance as possible.

Each tax year, you can pay a total of up to £20,000 into Isas. You must take advantage of each tax year’s Isa allowance prior to the deadline, or you’ll lose it. 

On the first day of the following tax year, your annual Isa allowance resets, and you can pay in another £20,000 – either into Isas you already have, or new accounts.

Here, Telegraph Money explains how to make sure you’re not caught out by the next Isa deadline day.

Understanding the Isa deadline

The Isa deadline is the date when your Isa allowance for the current tax year runs out. The day after the deadline is when your new allowance begins, and you’ll have a year to use it.

When is the deadline?

The tax year begins on April 6 each year, and ends on April 5. This means that you have until April 5 every year to take advantage of your full Isa allowance.

Impact of missing the Isa deadline

Failing to use up your Isa allowance before the deadline means you’re missing out on an excellent tax benefit. 

Investment growth and savings interest held in Isas are tax-free, so it makes sense to use as much of your allowance as possible to potentially cut future tax bills.

Any unused Isa allowance does not roll over to the next tax year, so you’ll still only be able to deposit a maximum of £20,000 across all of your Isas.

To avoid wasting the opportunity to shield your cash, it’s crucial that you use as much of your annual Isa allowance as you intend to prior to the deadline.

How to prepare

Your Isa allowance is there to be used, but it’s important to think carefully about how you use it. For cash savers, you’ll need to weigh up the prospects of a savings account vs cash Isa.

A normal savings account is likely to reward you with higher interest rates. But as the interest you earn is taxable, you’ll need to work out the maximum amount you’ll be able to save in one before you’ll exceed your personal savings allowance.

To keep your savings interest free of tax, you might want to go for a cash Isa instead.

If you’re an investor, maximising your allowance within a stocks and shares Isa can help you avoid paying capital gains and dividend tax on the returns you make in the stock market, or in government or corporate bonds.

This means that ahead of the deadline, you should consider whether or not you’ve taken advantage of your full Isa allowance.

If you can avoid it, don’t wait until April 5 to make last-minute Isa deposits or to open a new Isa.

This is because in some instances, it can take several working days to process a deposit or account registration, meaning you might still miss the deadline, so it’s best to plan ahead.

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