This cash ISAs guide is written by Clare Westwood of the Savings team at moneysupermarket.com, the price comparison website, and aims to highlight some key points to consider when using or opening a cash ISA account.
A cash ISA is a great idea for any UK-based saver as it means saving a set amount and keeping that amount tax free. It is easy to keep track of your savings with a cash ISA. You can apply for a cash ISA account as soon as you turn sixteen.
The amount of money you can save in a cash ISA changes every year but account holders can currently save up to £3,600 tax free if you are aged under 50. From April 2010 people of all ages will be able to save £5,100 before being taxed.
When the term ‘cash ISA’ is discussed, generally people ask why they are a better option than regular savings accounts. The main difference is that cash ISAs do not charge up to 20% interest each year like some savings accounts.
Cash ISAs allow the account holder to keep all of the interest earned which means it is most unlikely that a cash ISA will give you less interest than a regular savings account. The longer you keep your money in the greater the return will be.
One misunderstanding when it comes to ISAs is that the money needs to be held for a certain period of time before the account holder will benefit from any tax free savings. Some ISAs allow you to withdraw money and not lose tax benefits on the remaining sum.
Switching ISA Account Providers
Interest rates are up and down in the current financial climate, which means that some savers could benefit from changing who they bank with.
Switching account providers for an ISA account is not quite as easy as switching a standard savings account, as once the money is taken out of the account, the holder loses all the tax benefits they would have had. This can be prevented by insuring that your old provider and new provider pass on all the information about your account history. Most account providers do carry out this service, but it is worth checking that they do when you open your account.
Editor’s note: I have not personally used, nor, beyond this post, am I affiliated with any cash ISA provider. Readers are encouraged to do their own independent research and make their own investment and savings decisions. This post is provided for information purposes.
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