By Lea Pachta

ISA applications are up 52% for the start of the 2010/11 tax year compared to the start of the 2009/10 tax year.

According to research from Fair Investment Company, applications for both cash and stocks and shares ISAs have increased by more than half for 6-9th April 2010 compared with 6-9th April 2009.

In 2009, Fair Investment Company received 228 applications for ISAs in the first three days of the tax year. This year, the figure was 347 for the same period.

“Our figures reveal that ISA applications made at the start of the tax year are considerably higher than they were at this time last year,” said Nick Scarrett, head of investment and pensions at Fair Investment Company.

“There could be a number of reasons for this, but one of the main ones is likely to be the fact that the ISA allowance has been increased considerably — from £7,200 to £10,200.
“The extra £3,000 tax efficient allowance is substantial, and this may well have made many investors take another look at ISA investment as a more significant part of their investment portfolio.”

People are also starting to save a larger percentage of their income — official Government statistics show that the percentage of earnings Brits put aside as savings or to pay off debt fell from a long-term average of about 7% to just 1.5% in 2008. It crept back up to 7% last year, and figures suggest it is now around 8%, the highest in years, which is likely to have resulted in increased ISA applications.

Nick says that investors are also starting to realise how much more they can get from their ISA if they invest early. A recent Fair Investment survey revealed that more than half of investors (51%) make a lump sum ISA investment at the start of the season, with 37% already pledging to use their full £10,200 allowance this year.

“Making a lump sum ISA contribution at the beginning of the season is the most efficient way to use your ISA allowance because you then have the entire tax year in which to earn a return on that cash,” said Nick.

The survey also revealed that of those who didn’t invest the full ISA allowance, 32% did maximise their cash ISA allowance, with 14% per cent planning to invest the new cash allowance of £5,100 again in the 2010/11 tax year.

“With such a big increase of the ISA limits, investing early could be even more beneficial,” says Nick, “so invest as much as you can now to take full advantage of the new limits.”

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