Cash ISA Guide, by Moneysupermarket

If you’re a UK resident and want to start saving for something special, a cash ISA should be one of your first considerations. They’re not as complicated as they used to be, and if used correctly, could net you an extra 20% a year in interest.

The way you can do this is simple: Once you open your ISA, you are allowed to place a certain amount into it every year that will earn interest completely free of tax. As it stands, that amount is £3,600 (or £5,100 for over 50s), but when the new tax year starts in April, that amount will rise to £5,100 for all. These numbers are the total you can deposit for the year, don’t forget; once you have deposited the full amount, you cannot deposit any more, even if you withdraw some first.

When you’re looking for an ISA, don’t be put off if the interest rates look lower than a comparable regular saver – because don’t forget that you won’t pay tax on that interest. A 3.5% interest regular saver will yield roughly the same amount of interest as a 3% interest rate ISA, for example.
Of course, with the economy in such a shaky state at the moment, interest rates can change rapidly, and for that reason it is often a good idea to keep an eye on what interest rates other ISA providers are offering – moneysupermarket.com says: “As with standard savings deals, there are catches that you need to watch out for. Some accounts include introductory bonuses, so the interest rate drops after a while – there is no need to avoid such accounts, but you need to make a note to move your money elsewhere once the bonus period ends otherwise you could be left earning an uncompetitive rate of interest.”. Many people believe that you need to keep an ISA in one place for a set time in order to be entitled to the tax free savings, but this is not always the case – many providers now offer ISA accounts that can be transferred with no notice. If you are planning on transferring an ISA, however, do not just withdraw the money from one account to put it into the other; you will lose your tax free benefits. Your new provider should have a form for you to complete which will allow for easy transfer of funds.

As mentioned previously, choosing your ISA carefully is essential to make sure you get the best deal available to you. cash ISAs can be a great way to save money so long as you have the best one for your situation, and moneysupermarket.com can help you find it quickly and easily.