Cash ISAs
A Cash Individual Savings Account (ISA) is part of the Government's Individual Savings Account scheme and runs from tax-year to tax-year (ie 6 April one year to 5 April the next). Interest is paid tax-free on this type of account.
How much can be saved in Cash ISAs?
You can save up to £3,000 during the tax year (this will go up to £3,600 for the new tax year on April 6). You cannot save more than £3,000 in the tax-year, so if you save £3,000 and make a withdrawal you cannot top it back up to £3,000. The most you can save each tax year is £3,000 subject to change by the Government.
How is interest paid on Cash ISAs?
In order for Cash ISAs to have interest paid tax-free, they must be operated within the rules outlined by the Government - these rules can be found in the ISA terms and conditions of individual providers. Interest depending on the provider is paid annually or monthly and may be subject to a minimum balance.
How do I find an appropriate Cash ISA?
It is important to be vigilant when shopping for Cash ISAs, as even the accounts that seemingly offer the best rates of interest can tie their customers down with terms and conditions or require the full deposit of £3,000 as an opening balance. There can also be penalties applied to withdrawals with can remove interest for a period of up to half a year. Because of this, it is worth looking at both the rate of interest and the small print of Cash ISAs to pick up any conditions or requirements that may not be suitable for you.
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Please bear in mind that:
Investment ISAs are designed as medium to long term investments, for example at least five years.
The value of your investment and the level of any income received from it can fall as well as rise and is not guaranteed and you may not get back the amount of your original investment.
The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
If you choose an index-tracking trust which invests overseas, exchange rate variations may cause the value of your investment to increase or decrease.
If you unsure what Investment ISA plan is right for you speak to an independent investment adviser.