The tax-free interest rates offered by Individual Savings Accounts, or ISAs, tend to come in cycles. Because the government limits the amount a person can save in any one tax year, the banks and investment companies tend to offer attractive interest rates in the run up to the April tax-year end, to pull in investors who havenít yet taken advantage of the allowance. A cash ISA can be the most straightforward way to grab these deals.
Cash ISAs are like regular bank savings accounts, except that with regular savings accounts, interest earnings are usually taxed. With cash ISAs, the interest is free of UK income tax, provided all ISA conditions are met. Unlike investing in the stock market, with cash ISAs your money is not at risk - you will get back more than you put in, although rates of interest can vary. So March can be the time of year to get the best cash ISAs.
Like bank savings accounts, cash ISAs vary in the notice you have to give to withdraw your money. The shorter the notice, usually the weaker the offering in terms of interest. If you are prepared to lock your money away for a longer period, you generally get a better rate.
The internet offers a wealth of services which can survey the market for cash ISAs, such as Money Supermarket and Fair Investment. The majority of banks and building societies also offer online management of your savings.
Itís important to note that you cannot save your whole ISA allowance in a cash ISA. The overall ISA limit is now £7,200 if you are under 50 and £10,200 if you will be aged 50 or over on 5 April 2010. The limit will be £10,200 for everyone from April 6 this year. However, not all of this allowance can be invested in a cash ISA. Currently, the cash ISA limit is £3,600 for under-50s and £5,100 for the over-50s - everyone will be allowed this new cash ISA limit from April 6, 2010. The remainder of your ISA allowance can be used in a stocks and shares ISA (which may be a fixed rate ISA), and can include corporate or government bonds, or the stock market-based products.
But now is a good time to get the best cash ISA deals and itís never been easier to apply. So perhaps it's time to start doing your research and finding the best deal for you?
The information given in this article was correct as at 20th March 2010. It does not, however, take account of any changes in regulations, the law or interest rates since that time.
This article is not a substitute for obtaining professional advice from a qualified person or firm.
Examples given of products and services are not exclusive. Other companies may provide the same products and services, and inclusion of a product or service should not be taken to indicate that Barclays recommends it over any similar product or service.
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