Cash ISAs
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The Individual Savings Account (ISA) was introduced on 6 April 1999.
Individuals who are both resident and ordinarily resident in the UK for tax purposes and aged 16 and over can open a cash ISA.
Those aged 18 and over can also pay into a stocks and shares ISA.
Returns from ISAs are free of income tax and capital gains tax. The tax year runs from 6 April in one year to 5 April of the following year.
New ISA rules introduced from April 2008 have increased the maximum investment allowed per tax year into a cash ISA from £3,000 to £3,600. Although the maximum investment allowed into ISAs each year is now £7,200, only £3,600 of this can be in the form of cash. Once you have opened a cash ISA, you are free to open a stocks and shares ISA with the remainder of your allowance. You are also free to transfer previous years’ cash ISAs into stocks and shares.
However, once you have reached your annual ISA allowance limit for that tax year, you cannot make any more deposits into your account, regardless of how much you may have withdrawn.
Cash ISAs can be instant access accounts (those which do not require any notice to be given to withdraw funds) or notice accounts (those where notice must be given to withdraw funds without penalty).
When choosing a Cash ISA you should consider:
- Access - It may be possible to operate cash ISA accounts via branch, post, telephone or the internet.
- Transfers - Some institutions will not accept transfers into their ISA accounts from other institutions. Some providers may penalise you for transferring money out of your cash ISA.
- Minimum balance requirements - With some ISAs there are minimum amounts you have to put in to open the account.
- Cash cards - Some cash ISAs offer cash cards to withdraw your money.
- Withdrawals - There may be limits to the number of withdrawals that can be made before you risk losing interest or the account has to be closed.
- Bonus rates - Some cash ISAs may include a bonus rate of interest for a certain amount of time. After this the rate of interest paid drops.
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If you are not sure which account suits your needs, why not use our savings search of the whole market to find out?
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