In these trying economic times, it is important to try to make full use of your money wherever you can, and this is where your ISA allowance can come in handy. You should try to make sure that you have used up your full ISA allowance each tax year as you cannot roll over any unused amount to the following tax year.
ISA’s are tax-free and you are allowed to invest up to £5,340 before April 5 2012 in a cash ISA. You will find that some accounts will also allow you to transfer in money that you have invested in the previous tax year so you can make sure that you have maximised returns on all your tax-free savings.
If you do not know much about ISA’s, here is a quick rundown for you. Basically there are two types: Cash ISAs, which work just like an ordinary savings account, except any interest you earn on your money is tax-free, and Equity ISAs (sometimes called stocks & shares ISAs) which invest in stocks and shares, here your capital is not guaranteed. Bearing in mind that the basic-rate taxpayer will give 20% of his interest in taxes in an ordinary savings account, and if you are a higher-rate taxpayer, the tax amount is 40% or 50% if you pay tax at the additional rate. (Amounts correct at time of publishing). You can get a cash ISA from most banks and building societies and they are available to anyone who resides in the UK and are over the age of 16. Cash ISAs come in various shapes and sizes, including easy access,and fixed-rate accounts.
Your total ISA allowance in this current tax year (which ends on 5 April 2012) is £10,680, with a maximum £5,340 in a cash ISA. This means that you can put £5,340 in a cash ISA and invest the remaining £5,340 in an equity plan. If you choose to put more of the allowance in a stocks and shares ISA, it will affect the limit on your cash account. For example, if you invest £8,000 in stocks and shares you could put only £2,680 into a cash ISA.
It is not true that you cannot access your money once it is in an ISA but you may have to give some notice and once you have taken it out, you cannot put it back in. And, you can open only one cash ISA in any one tax year, though you can switch your money to a different account if you find a better deal. We have searched the banks and building societies to find you the best ISA’s on the market at present. But remember, you only have until April 5th to open one, or transfer your money into a different one, so hurry!
Cheshire Building Society – 3.50% AER
Need to have received your cheque by the 5th of April in order to qualify for this year’s cash ISA allowance. Offer a great rate of up to 3.50% AER tax-free variable including a fixed bonus of 2.50% paid until 30 September 2013 on balances of £1,000+. Balances below £1,000 earn a rate of 0.25% AER tax-free variable. Unlimited withdrawals and deposits up to your annual cash ISA allowance. Open your account online today with at least £1,000. You will receive a welcome letter with everything you need to manage your account by post. Direct Cash ISA is only open to new subscriptions and not available for transfers from existing ISAs held with The Cheshire or any other provider. After 30 September 2013 a rate of 1.00% AER tax-free (variable) will be paid. The product is a limited issue and may be withdrawn at any time.
NatWest – 3.50% AER e-ISA: Special offer
Earn from 3.00% AER (variable) includes a bonus of 1.00% Gross p.a. (fixed) for 12 months added to the standard variable interest rate. Take advantage of this limited offer now, as it may be withdrawn at any time. Earn from 3.00% AER (variable) to 3.50% AER (variable) (balances £30,000+) tax free on your savings including a bonus of 1% gross p.a. (fixed) for 12 months. Transfers in allowed- bring all your cash ISAs together in one place . Instant access – and easy to manage online only account. The bonus is added to the standard variable interest rate and starts on the 15th or 16th day of the next month after your account is opened. 12 months after the bonus starts interest will automatically revert to the standard variable rate. This special offer is only available to customers who do not currently have an e-ISA account with NatWest.
Santander Direct ISA 3.30 AER
The amount of 3.30% AER (variable) tax free for the first 12 months. Minimum opening deposit £2,500. This rate Includes a 2.80% tax free/AER variable bonus for the first 12 months. After 12 months, the account will pay the underlying rate, currently 0.50%. Deposit from £2,500 up to the annual cash ISA limit. Option of transferring in your existing cash ISAs. Direct access to your money via telephone, cash machine and online. The Direct ISA is a cash ISA. A 14 day cancellation period applies.
Principality 3.10% AER
This ISA can be opened and managed online, giving you easy and secure access to your statements and balance whenever you want. The rate includes an unconditional bonus of 1.30% above the standard e-ISA rate of 1.80% tax-free^ p.a./AER† (Variable). The bonus is payable for the first 12 months from the date you open your ISA. If you already have a Cash ISA with someone else, you could enjoy a better rate on those savings with Principality. We outline the simple steps to making a transfer when you apply. You don’t have to give notice and there is no limit on the amounts you can withdraw as long as you maintain a minimum balance of £1. Any withdrawals made are via the account linked with your e-ISA Issue 3 account. Please note, funds withdrawn from an ISA cannot be replaced. The minimum balance is just £1. The maximum deposit for the current tax year is £5,340 (the current annual cash ISA limit), and you can also transfer in your existing Cash ISA subscriptions. Once opened, you can set up a direct debit to make regular payments into your e-ISA, making it easier for you to save. Interest is calculated daily and paid into your e-ISA account annually on April 6th each year.