July 25 2014 Latest news:

People wanting to take advantage of tax-free saving this year have just a few days left to act, otherwise they will lose their annual allowances for good.

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The current tax year ends on April 5, and while a lot has been said about the changes due to come in at the start of 2011-12, it’s important not to overlook the opportunities that will disappear at the same time.

With average household disposable income falling for the first time in three decades, a growing number of people might find they have no spare cash to save. Others might feel they do not want to put their money away at a time when interest rates are paltry and so few accounts are keeping pace with inflation.

But for those who do want to take advantage of the tax-free benefits of cash Isas, the good news is that rates have been creeping up recently. They are still nowhere near the levels of a few years ago, but it’s possible to get rates of 3pc-plus on the high street without too much hunting around and without having to lock your money away for a minimum period.

If you have some money to put away but you are not sure whether to use this year’s £5,100 cash Isa allowance, remember that anything you put aside now will be well placed to benefit when interest rates start to return to their previous healthy levels.

What you cannot do is post-date your allowance – in other words, if you don’t use it now, you will not be able to play catch-up in the future.

“The tax benefits may not be massive in year one, but building up an Isa nest egg over a period of years will prove a wise and rewarding strategy,” said Andrew Hagger, an analyst at Moneynet.co.uk.

“With savings rates still historically very low, making use of an Isa is a simple yet effective way of boosting your interest income.

“The maximum cash deposit for the current tax year is £5,100, but even if you have a smaller sum to save, an Isa still makes financial sense.”

There is always a degree of guesswork when it comes to future returns, but there is a growing school of thought amongst the experts that the best option is a variable-rate account. Going instead for a fixed rate might mean you get a higher return initially, but if rates start to rise, you won’t enjoy the benefits.

Kevin Bray, a banking analyst at Defaqto, said: “With so much uncertainty surrounding when and how quickly the Bank of England base rate will rise, it is difficult for people to judge whether they should opt for longer-term sav-ings options.

“Given this situation, it is important for savers considering fixed-term options to be fully aware of the impact a base rate rise could have.”

Mr Hagger at Moneynet added: “With variable-rate Isas, you can benefit from a tax-free rate but still retain imme-diate access to your cash should you need it, and some accounts can be opened with as little as £1.

“The Isa market has been a hotbed of activity with providers clambering for those important best-buy places in the hope it will drive large amounts of business as we approach the tax-year crossover.”

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