In today’s economic climate, people are becoming more inclined to save. Saving can be a complicated business initially, and there are always a lot of questions to ask- who to save with, what interest rate will I receive, how much of my savings will be tax free? All of these questions must be considered before committing to a savings account. This guide, brought to you by Moneysupermarket, is designed to make cash ISA’s more understandable, and will hopefully help you to make a decision on how to watch your savings grow.
Cash ISA’s allow you to save a capped amount of money tax-free, which is understandably a desirable method of saving. Currently, if you’re aged in between 16-50 you are allowed to save up to £3,600 annually tax-free in a cash ISA account. When you hit 50 this allowance will increase to £5,100 per annum. However, as of April 2010, everyone will be allowed to save up to £5100 per year.
There is a wide-spread confusion about how much you have to deposit into your cash ISA. Many companies allow you to deposit as little as £1, and you can deposit as much or as little, as frequently as you like. Other companies however, will ask you to deposit a certain amount. Remember, you are only allowed to deposit £3,600 tax-free throughout the year.
People often wonder about withdrawing the funds in their cash ISA account. There should be an option to open an easy-access cash ISA account, where you can withdraw your money whenever you please. However, by withdrawing before the end of the tax year you may be losing some of the tax-free privileges. Moneysupermarket says, ‘you will lose the tax-free status on anything you withdraw, so it is worth keeping your money invested in ISAs for as long as possible and use any other savings first.’ This will ensure that your interest rate is more likely to stay the same, as you can be penalised in this area if withdraw money from your account.
To get the best cash ISA accounts with the best interest rates, you should shop around before you commit to a savings account. Compare cash ISAs with an online comparison tool, like Moneysupermarket, so you get a better understanding of the ISA’s market before you open an account.
This article is a guest post by Moneysupermarket.
