Investors “should think very carefully before skipping a year” of investing in their ISA, according to Barclays Stockbrokers, because one of the key features of the allowance is that it cannot be carried over into the next tax year.

People have until April 5, at which point a new tax year starts and their ISA allowance for the 2008/2009 tax year will be lost, along with the potential interest earned, it said.

ISAs “enable investors to build tax free shelter brick by brick, year by year,” so investors should “consider contributing as much as they can afford” into their ISA, the share dealing account provider stressed.

Both Cash ISAs and Stocks and Shares ISAs offer flexibility, it added, because they can be easily liquidated if necessary, and the returns are exempt from tax.

Barclays Stockbrokers encourage investors to consider subscribing to their full £7,200 ISA allowance as a “priority,” and, if they are concerned about conditions in the equity market posing a threat to their investment, then there are alternative solutions.

“Why not hold gold, oil or foodstuffs in your ISA?” Barclays Stockbrokers suggests. “By investing in exchange traded commodities (ETC) investors can get access to uncorrelated and even negatively correlated assets to the conventional shares or funds which are perennial favourites with ISA investors.”

But, it added, “investors should be aware that whilst these are negatively correlated assets they can be equally volatile and investors may lose money as well as gain.”

For those who are more adventurous, it added, the current stock market levels offer the potential for very significant returns once the economy starts to recover from the current recession.

Investors might regret it if they do not take advantage of their tax-free savings allowance, Barclays Stockbrokers warned, and they could also regret the lost potential for growth by investing when share prices are down.

“Given the current low valuations of stocks in certain sectors e.g. high street banks with a share price of less then £1, it could well see growth well in excess of 100 per cent over the medium term,” it said.

“Therefore the rationale for using ISA allowances is more compelling now more than most years.”

Research carried out by Barclays Stockbroker found that 45 per cent of Stocks and Shares ISA investors have already invested their full allowance for this year, while a third of investors said that they will invest more next year in the hope that they will get better returns in the long run.

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© Fair Investment Company Ltd