How Students Can Make the Most of Their ISA Allowance

Stocks and shares ISAs are a well-known and popular form of savings and investments. They allow you to save a certain amount of money every year without having to pay tax on the dividends you earn. The shares ISA limit for the current tax year is £10680 and if you're a student who's able to save, it's a worthwhile investment. Although more than 19 million people have an ISA, many of them don't make the most of their yearly allowance.

Financially, being a student can be tough. If however you're able to save the maximum amount of money in your investment ISA every year, it is certainly worth doing. The best stocks and shares ISAs will let you access your money whenever you need it – perfect for those emergency course book or accommodation expenses. Also, the more you save, the bigger the potential for a good return on your investment.

When you are looking at a share ISA, one thing to remember is that as the stock market fluctuates, so will the balance of your ISA. This means that your money can go down as well as up, but as markets are more likely to go up in the long term than down, the investment should certainly pay off in time.

It's also worth making the most of your ISA allowance wherever possible as, if you don't, you might end up paying tax on your interest due to saving elsewhere. Most students working part time will be on a basic tax rate and pay 20% tax on savings account interest. This will rise to 40% when you become a higher rate tax payer. Also, if you invest in stocks and shares outside of a share ISA and receive significant dividends as a result, you could end up paying capital gains tax – and also income tax if you're a higher rate taxpayer.

This means that it makes sense to utilise your stocks and shares ISA allowance if you can. Particularly if you are serious about investment, this can help to maximise your returns while giving you access to your money when necessary.