A Guide to Cash ISA’s

Filed Under Finance

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

The amount of money you can save in a cash ISA changes every year but it currently £3,600 that is allowed to be saved 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 a cash ISA does not charge 20% interest each year like some savings accounts.

Cash ISA’s 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.

One misunderstanding when it comes to ISA’s 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 ISA’s allow you to withdraw money and not lose tax benefits on the remaining sum.

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.

A guide to Cash ISAs by the savings team at moneysupermarket.